Use the following to answer question:
-(Figure: The Market for Lattes)Use Figure: The Market for Lattes.What is the price elasticity of supply between the prices of $2 and $2.50 per cup,using the midpoint formula?
A)0.33
B)1.00
C)1.51
D)3.00

Question

Use the following to answer question: 
-(Figure: The Market for Lattes)Use Figure: The Market for Lattes.What is the price elasticity of supply between the prices of $2 and $2.50 per cup,using the midpoint formula?
A)0.33 
B)1.00 
C)1.51 
D)3.00

Quizplus · Accepted Answer

The price elasticity of supply is calculated using the midpoint formula: [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Assuming the quantities supplied at $2 and $2.50 are Q1 and Q2 respectively, the calculation results in an elasticity of 1.00.

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