Question

A. what is the formula for measuring the price elasticity of supply? percentage change in quantity supplied/percentage change in price percentage change in quantity demanded/percentage change in income percentage change in quantity demanded/percentage change in price .

b. suppose the price of apples goes up from $20 to $24 a box. in direct response, goldsboro farms supplies 1,400 boxes of apples instead of 1,200 boxes. compute the coefficient of price elasticity (midpoints approach) for goldsboro's supply. instructions: round your answer to 2 decimal places. price elasticity = .

c. is its supply elastic, or is it inelastic? .

Answer 1

The formula for measuring elasticity is percentage change in quantity supplied/percentage change in price

The midpoint approach would take the difference in quantity (Q2-Q1) and divide that by the average of the quantities (Q2+Q1)/2. And then the same for price.

Then would would divide both of those to get the coefficient.

So quantity: 1,400-1,200 / (1400+1200)/2= 200/1300 = .154

Then price: 24-20/ (24+20)/2 = 4/22 = .182

Then divide: .154/.182 = .85 this is your coefficient

C. Being that the coefficient is less than 1, we would say that the supply is relatively inelastic.