Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8000 units to 10000
Units.Use the midpoint formula to calculate the price elasticity of supply.
A)1.22
B)1.0
C)0.82
D)0.07

Question

Quizplus · Accepted Answer

The midpoint formula for price elasticity of supply is [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Plugging in the values: [(10000 - 8000) / (10000 + 8000) / 2] / [(0.90 - 0.75) / (0.90 + 0.75) / 2] = 1.22.

Suppose That the Price of a Money Clip Increases from $0.75