Question

As the price of tomatoes fell from $2.5 to $2, the quantity imported from mexico fell from 1,800 tons to 900 tons. the elasticity of supply of tomatoes imported from mexico is: 0.25.

Answer 1

The elasticity of supply can be calculated using the formula:

Elasticity = [(Q2 – Q1) / ((Q2 + Q1) / 2)] / [(P2 – P1) / ((P2 + P1) / 2)]

or in simpler terms: Elasticity =(ΔQ / Qave) / (ΔP / Pave)

Where Q and P are the quantity and price respectively

We are given that:

P1 = $2.5 Q1 = 1,800 tons

P2 = $2 Q2 = 900 tons

Substituting the given values into the equation:

Elasticity = [(900 – 1800) / ((900 + 1800) / 2)] / [(2 – 2.5) / ((2 + 2.5) / 2)]

Elasticity = (-900 / 1350) / (-0.5 / 2.25)

Elasticity = 3.0

Since elasticity is positive, the supply is directly proportional to the price.