When banana prices decreased from $15 to $9 per box, Caribbean production fell from 8 billion to 6 billion boxes per month

Economics Jan 19, 2021

When banana prices decreased from $15 to $9 per box, Caribbean production fell from 8 billion to 6 billion boxes per month. Calculate the price elasticity of supply for Caribbean banana producers using the Midpoint Formula.

Expert Solution

The elasticity is -1.75. Using the mid-point method, the elasticity is [(15 - 9)/(15 + 9)/2)]/[(6 - 8) / (6 + 8)/2] = 0.5 / -0.285 = -1.75.

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