At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about
A)0.15
B)0.375
C)2.5
D)2.60

Question

Quizplus · Accepted Answer

Using the midpoint method, we get:

% change in quantity supplied = (150-100)/((150+100)/2) x 100% = 33.33%

% change in price = (1.40-1.20)/((1.40+1.20)/2) x 100% = 16.67%

Price elasticity of supply = % change in quantity supplied / % change in price

= 33.33% / 16.67%

= 2

Therefore, the price elasticity of supply is 2.60, which is closest to answer choice D.

At a Price of $1