Suppose that an increase in the price of carrots from $1.30 to $1.80 per pound increases the quantity of carrots that carrot farmers produce from 1.2 million pounds to 1.6 million pounds.Using the midpoint method,what is the approximate value of the price elasticity of supply?
A)-1.04
B) 0.67
C) 0.89
D) 1.13

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Using the midpoint method, the percentage change in quantity supplied is (1.6 million pounds - 1.2 million pounds) / ((1.6 million pounds + 1.2 million pounds) / 2) = 0.25. The percentage change in price is ($1.80 - $1.30) / (($1.80 + $1.30) / 2) = 0.29. Therefore, the price elasticity of supply is 0.25 / 0.29 = 0.89.

Suppose That an Increase in the Price of Carrots from $1.30