Question

At a price of $4 per unit, Gadgets Inc. is willing to supply 20,000 gadgets, while United Gadgets is willing to supply 10,000 gadgets. If the price were to rise to $8 per unit, their respective quantities supplied would rise to 45,000 and 25,000. If these are the only two firms supplying gadgets, what is the elasticity of supply in the market for gadgets?

Answer 1

elasticity of supply in the market for gadgets is 1.2

Step-by-step explanation:

to find out

elasticity of supply

solution

we get here elasticity of supply that is express as

elasticity of supply = change in quantity supply ÷ change in price ..........1

change in quantity supply is =
`((45000+25000)-(20000+10000))/(((45000+25000)+(20000+10000))/(2))`

change in quantity supply is = 0.8

and

change in price will be

change in price =
`(8-4)/((8+4)/(2))`

change in price = 0.667

put here value we get

elasticity supply =
`(0.8)/(0.667)`

elasticity supply = 1.2

so that elasticity of supply in the market for gadgets is 1.2