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Suppose that the price of tomatoes in the market changed from P15 to P12. As a result, a farmer in Qodi reduces his supply of tomatoes from 6 boxes to 5 boxes a week. a) Calculate the price elasticity

User Tim Kamm
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The price elasticity of supply for tomatoes in this case is approximately 0.833.

To calculate the price elasticity of supply, we need to use the formula:

Price Elasticity of Supply = Percentage Change in Quantity Supplied / Percentage Change in Price

Given that the price of tomatoes changed from P15 to P12, and the farmer's supply reduced from 6 boxes to 5 boxes a week, we can calculate the percentage changes in quantity supplied and price.

Percentage Change in Quantity Supplied:

[(5 - 6) / 6] * 100 = -16.67%

Percentage Change in Price:

[(12 - 15) / 15] * 100 = -20%

Now, let's plug these values into the formula to calculate the price elasticity of supply:

Price Elasticity of Supply = (-16.67% / -20%)

The negative signs indicate the inverse relationship between price and quantity supplied, meaning that as the price decreases, the quantity supplied also decreases.

Simplifying the expression:

Price Elasticity of Supply ≈ 0.833

Therefore, the price elasticity of supply for tomatoes in this case is approximately 0.833.

Learn more about elasticity here:

User Lukas Jelinek
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