Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / At a price of $150, a cell phone company manufactures 200,000 units
At a price of $150, a cell phone company manufactures 200,000 units. At a price of $250, the company manufactures 400,000 units. What is the price elasticity of supply?
a. 0
b. 0.75
c. 0.80
d. 1.33
Here, P1 = 150, Q1 = 200,000, P2 = 250, and Q2 = 400, 000. Therefore,
The elasticity of supply = % Change in quantity supplied / % Change in the price.
In this case, % change in the quantity supplied = Q2 - Q1 / Q1 * 100 = (400,000 - 200,000 / 200,000) * 100 which is 100.
Similarly, % change in the price level = P2 - P1 / P1 * 100 = (250 - 150 / 150) * 100 which is 66.67.
Henceforth, Elasticity of Supply = 100 / 66.67 which is 1.33 (approximately).
