Question

The manager of a 100-unit apartment complex knows from experience that all units will be occupied if the rent is $500 per month. A market survey suggests that, on average, one additional unit will remain vacant for each $10 increase in rent, What rent (in dollars per month) should the monager charge to maximize revenue? per month

Answer 1

The price elasticity of supply measures the responsiveness of the quantity supplied to a change in price. In this case, the quantity supplied increases by 30% and the price increases by 7.7%. Therefore, the price sensitivity is 3.9.

Step-by-step explanation:

The price elasticity of supply measures the responsiveness of the quantity supplied to a change in price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, the quantity supplied increases from 10,000 units to 13,000 units, which is an increase of 3,000 units. The percentage change in quantity supplied is 30% [(3,000 / 10,000) x 100]. The price increases from $650 to $700, which is an increase of $50. The percentage change in price is 7.7% [(50 / 650) x 100]. Therefore, the price sensitivity is 3.9 (30% / 7.7%).

Answer 2

To calculate the price elasticity of supply, we can use the formula: percentage change in quantity supplied / percentage change in price. In this case, the price sensitivity is 3.9.

Step-by-step explanation:

To calculate the price elasticity of supply, we need to determine the percentage change in quantity supplied and the percentage change in price.

Using the given information, the initial quantity supplied is 10,000 units and the final quantity supplied is 13,000 units. The price initially is $650 and increases to $700.

The percentage change in quantity supplied is calculated as [(13,000 - 10,000) / 10,000] * 100% = 30%.

The percentage change in price is calculated as [(700 - 650) / 650] * 100% = 7.69%.

The price sensitivity, or price elasticity of supply, is determined by dividing the percentage change in quantity supplied by the percentage change in price. In this case, it is 30% / 7.69% = 3.9.