Question

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about:______.

a. 2.20
b. 0.90
c. 1.11
d. 0.45

Answer 1

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about:______.

A. 2.20

B. 0.90

C. 1.11

D. 0.45

-KeonLee

I hope it help

#Carry on learning

Answer 2

a. 2.20

Step-by-step explanation:

The computation of the price elasticity of supply is shown below;

Here,

P1 = $1 Q1 = 100

P2 = $1.20 Q2 = 150

We know that

Price elasticity = percentage change in quantity supplied ÷ percentage change in price

where

Percentage change in quantity supplied = (Q2-Q1)÷(Q2+Q1) ÷ 2)×100

= (150-100) ÷(150+100) ÷ 2)×100

= 40

And,

Percentage change in price is

= (P2-P1) ÷ (P2+P1) ÷ 2)×100

= ($1.20 - $1) ÷ ($1.20 + $1) ÷ 2)×100

= 18.1818

So, price elasticity of supply is

= 40 ÷ 18.1818

= 2.20