Question

If the price of a haircut is $15, the number of haircuts provided is 100. If the price rises to $30 per haircut, barbers will work much longer hours, and the supply of haircuts will increase to 300.

Instructions: Round your answers to two decimal places.
The price elasticity of supply for haircuts between $15 and $30 using the mid-point method is:________.

Answer 1

The price elasticity of supply for haircuts between $15 and $30 is calculated using the mid-point method and is found to be 1.50 when rounded to two decimal places.

Step-by-step explanation:

The price elasticity of supply for haircuts between $15 and $30 using the mid-point method can be calculated with the formula:

Price Elasticity of Supply (PES) = (% Change in Quantity Supplied) / (% Change in Price)

First, calculate the percentage changes using the midpoint formula:

% Change in Quantity Supplied = ((300 - 100) / ((300 + 100) / 2)) * 100 = (200 / 200) * 100 = 100%

% Change in Price = (($30 - $15) / (($30 + $15) / 2)) * 100 = ($15 / $22.50) * 100 ≈ 66.67%

Now, divide the percentage change in quantity by the percentage change in price:

PES = 100% / 66.67% ≈ 1.50

Therefore, the price elasticity of supply for haircuts between $15 and $30, rounded to two decimal places, is 1.50.

Answer 2

1.5

Step-by-step explanation:

Price elasticity of supply measures the responsiveness of quantity supplied to changes in price of the good.

Price elasticity of supply = midpoint change in quantity supplied / midpoint change in price

Midpoint change in quantity supplied = change in quantity supplied / average of both supply

change in quantity supplied = 300 - 100 = 200

average of both supply = (300 + 100) / 2 = 200

200 / 200 = 1

midpoint change in price = change in price / average of both price

change in price = $30 - $15 = $15

average of both price = ($30 + $15) / 2 = $22.50

15 / 22.5 = 0.67

1 / 0.67 = 1.5

If the absolute value of price elasticity is greater than one, it means supply is elastic. Elastic supply means that quantity supplied is sensitive to price changes.