Question

Assume a steel company is willing to sell its alloy beams for $400 a piece and produce 100000 units. At a price of 449 they are willing to sell 100,935 units. From this information, calculate the price elasticity of supply.

Answer 1

The price elasticity of supply is 0.0763 or 7.63%.

Step-by-step explanation:

Price Elasticity of Supply shows response of quantity supplies to the price of the product supplied. Its Formula is as follow:

Price Elasticity of Supply = % change in supply / % change in price

Price Elasticity of Supply = (0.935% / 12.25%) x 100 = 7.63%

% Change in Supply = ( 100,935 - 100,000 ) /100,000 = 0.935%

% Change in Price = ( 449 - 400 ) / 400 = 12.25%