In order to calculate the price elasticity of supply, we need to use the following formula:
Price elasticity of supply = (% change in quantity supplied) / (% change in price)
To calculate the % change in quantity supplied, we can use the formula:
% change in quantity supplied = (new quantity supplied - initial quantity supplied) / initial quantity supplied
And to calculate the % change in price, we can use the formula:
% change in price = (new price - initial price) / initial price
Using the given information:
Initial quantity supplied = 100,000
New quantity supplied = 140,000
Initial price = $40,000
New price = $45,000
% change in quantity supplied = (140,000 - 100,000) / 100,000 = 40%
% change in price = (45,000 - 40,000) / 40,000 = 12.5%
Price elasticity of supply = 40% / 12.5% = 3.2
Therefore, the price elasticity of supply is 3.2.
At a price of $40 comma 000
,
producers of midsized automobiles are willing to manufacture and sell 100 comma 000
cars per month. At a price of $45 comma 000
,
they are willing to produce and sell 140 comma 000
a month.
Part 2
The price elasticity of supply is---.
3 answers
The price elasticity of supply is 2.8.
Based on your answer, supply is
a. elastic
b. .unit elastic
c. inelastic
.
Based on your answer, supply is
a. elastic
b. .unit elastic
c. inelastic
.
Based on the calculated price elasticity of supply of 2.8, supply is considered to be elastic.