Final answer:
Using the midpoint method, the price elasticity of supply is calculated to be approximately 2.33, which indicates that the supply of basketballs is elastic.
Step-by-step explanation:
The price elasticity of supply measures how much the quantity supplied of a good responds to a change in the price of that good. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. Using the midpoint method, this elasticity can be calculated with the given information: the initial price of $15 with a quantity supplied of 5,000 and a new price of $20 with an increased quantity supplied of 10,000.
To calculate the percentage changes using the midpoint formula, we first determine the average price and quantity. The average price is ($15 + $20) / 2 = $17.50, and the average quantity is (5,000 + 10,000) / 2 = 7,500. The percentage change in quantity is ((10,000 - 5,000) / 7,500) × 100 = 66.67%, and the percentage change in price is (($20 - $15) / $17.50) × 100 = 28.57%. The elasticity of supply is then calculated as the percentage change in quantity supplied (66.67%) divided by the percentage change in price (28.57%), which equals approximately 2.33.
Therefore, using the midpoint method, the price elasticity of supply is 2.33. This indicates that the supply is elastic since the elasticity is greater than 1, meaning that the quantity supplied is relatively responsive to price changes.