Question

assume that the price for mid-sized bulldozers increased from $200,000 to $250,000 and the quantity supplied increased from 2,000 to 2,200. calculate the price elasticity of supply coefficient. show your work.

Answer 1

The price elasticity of supply coefficient for the increase in price and quantity supplied of mid-sized bulldozers is 0.43, indicating a relatively inelastic supply.

Step-by-step explanation:

To calculate the price elasticity of supply coefficient for mid-sized bulldozers, you need to use the Midpoint Method, which is used to determine the percentage change in quantity supplied and the percentage change in price.

Calculation Steps:

1. Calculate the percentage change in quantity supplied: ((2,200 - 2,000) / ((2,200 + 2,000) / 2)) x 100 = (200 / 2,100) x 100 ≈ 9.52%
2. Calculate the percentage change in price: (($250,000 - $200,000) / (($250,000 + $200,000) / 2)) x 100 = ($50,000 / $225,000) x 100 ≈ 22.22%
3. Divide the percentage change in quantity supplied by the percentage change in price to get the elasticity of supply: 9.52% / 22.22% ≈ 0.43

Therefore, the price elasticity of supply coefficient is 0.43, which means that the supply is relatively inelastic since the coefficient is less than 1.