Question

Suppose the price of university sweatshirts increases from $10 to $20 and the quantity supplied increases from 20 to 30. The price elasticity of supply, using the midpoint formula, is:______.A) 0.66. B) 1.50. C) 0.60. D) 1.66.

Answer 1

C) 0.60.

Step-by-step explanation:

USING MIDPOINT FORMULA

i) Percentage change in quantity supplied

=changes in QS/(changes in QS/2) x 100/1

=(30-20)/(30+20)/2 X 100/1

=10/25 X 100

=40%

ii) Percentage changes in price

=Changes in Price/(Changes in Price/2) x 100/1

=($20-$10)/($20+$10)/2 x 100/1

=$10/$15 x 100/1

=0.66667 x 100

=66.67%

Price Elasticity of supply = %Changes in Quantity supplied

%Changes in Price

ES= 40%/66.67%

ES= 0.59999

ES=0.6