Question

To calculate the price elasticity of supply using the midpoint method, you would use the following approach:

a. % change in quantity minus the % change in price
b. % change in quantity / % change in price
c. Price times quantity
d. % change in price / % change in quantity

Answer 1

To calculate the price elasticity of supply using the midpoint method, you divide the percentage change in quantity supplied by the percentage change in price, using the average values for both quantity and price.

Step-by-step explanation:

To calculate the price elasticity of supply using the midpoint method, you would use the approach that involves dividing the percentage change in quantity supplied by the percentage change in price. This is the correct formula because the price elasticity of supply measures how much the quantity supplied of a good responds to a change in the price of that good.

Therefore, the formula as per the midpoint method is calculated as follows: % change in quantity supplied = [(Q2 - Q1) / ((Q2 + Q1) / 2)] × 100, % change in price = [(P2 - P1) / ((P2 + P1) / 2)] × 100, Price elasticity of supply = (% change in quantity supplied) / (% change in price). This represents the responsiveness of the quantity supplied to a change in price, using the average percentage change in both quantity and price.