Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / When the price of paper increases from $100 to $105 per ton, the quantity supplied increases from 300 to 320 tons per day
When the price of paper increases from $100 to $105 per ton, the quantity supplied increases from 300 to 320 tons per day. The price elasticity of supply is _____.
The price elasticity of supply is equal to the difference between the old and new quantity divided by the average of the two quantities then all of this divided by the difference between the old and new price divided by the average of the two prices The midpoint formula uses the average of the two quantities, but other formulas exist using the old quantity instead of the average of the two quantities. Using the midpoint formula for Price elasticity of supply we obtain:
Price elasticity of supply = ((Old quantity - New quantity)/((Old quantity + New quantity)/2)) / ((Old price - New price)/((Old price + New price)/2)
The Price elasticity of supply = ((300 - 320)/((300+320)/2) / ((100 - 105)/((100 + 105)/2)
= (-20/310)/(-5/102.5)
= 1.32258
The price elasticity of supply is equal to 1.32258 using the midpoint formula.
