On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is (quantity supplied= 250, price = $2.50). Using the midpoint method, the price elasticity of supply is about
A) 0.2.
B) 0.5.
C) 1.0.
D) 2.5.

Question

Quizplus · Accepted Answer

The midpoint method calculates elasticity as the percentage change in quantity divided by the percentage change in price. Here, the percentage change in quantity is (250-200)/225 = 0.222, and the percentage change in price is (2.50-2.00)/2.25 = 0.222. Thus, the elasticity is 0.222/0.222 = 1.0.

On a Certain Supply Curve, One Point Is (Quantity Supplied