At price of $1.20,a local pencil manufacturer is willing to supply 150 boxes per day.At a price of $1.40,the manufacturer is willing to supply 170 boxes per day.Using the midpoint method,the price elasticity of supply is about
A)2.0.
B)1.23.
C)1.00.
D)0.81.

Question

Quizplus · Accepted Answer

Using the midpoint method formula:

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

% change in quantity supplied = (170-150) / [(170+150)/2] = 20/160 = 0.125

% change in price = (1.40-1.20) / [(1.40+1.20)/2] = 0.2/1.3 = 0.153

Price elasticity of supply = 0.125/0.153 = 0.81

Therefore, the price elasticity of supply is 0.81, which is closest to choice D (0.81).

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