The price elasticity of demand is –1.25, and the share of the tax borne by consumers is 0.80. what is the price elasticity of supply?

Question

asked Apr 18, 2018 194k views

1 Answer

Miggy · Answer 1 · 2018-04-23T04:45:08+0000

Price elasticity of demand is -1.25 = Ed

Price elasticity of supply = Es

Share of tax by consumers = 0.80 = Es / (Ed + Es) = Es / Es + 1.25

0.8 Es + 1 = Es

1 / 0.2 = Es = 5

Therefore, the price elasticity of supply is 5