Table 5-2

-Refer to Table 5-2.Using the midpoint method,which of the three supply curves has the most inelastic price elasticity of supply?
A) Supply curve X
B) Supply curve Y
C) Supply curve Z
D) There is no difference in the elasticities of the three supply curves.

Question

Table 5-2
 
-Refer to Table 5-2.Using the midpoint method,which of the three supply curves has the most inelastic price elasticity of supply?
A) Supply curve X 
B) Supply curve Y 
C) Supply curve Z 
D) There is no difference in the elasticities of the three supply curves.

Quizplus · Accepted Answer

The most inelastic supply curve will have the lowest price elasticity of supply. Using the midpoint method, we can calculate the price elasticity of supply for each curve: 
- For supply curve X, percentage change in quantity supplied = (10 - 8)/9 x 100% =  22.22% and percentage change in price = (5 - 4)/4.5 x 100% = 11.11%. Therefore, elasticity of supply = 22.22%/11.11% = 2.
- For supply curve Y, percentage change in quantity supplied = (9 - 6)/7.5 x 100% = 40% and percentage change in price = (6 - 4)/5 x 100% = 40%. Therefore, elasticity of supply = 40%/40% = 1.
- For supply curve Z, percentage change in quantity supplied = (8 - 6)/7 x 100% = 28.57% and percentage change in price = (7 - 5)/6 x 100% = 33.33%. Therefore, elasticity of supply = 28.57%/33.33% = 0.857.
Therefore, supply curve Z has the lowest elasticity of supply, which means it is the most inelastic of the three curves.

Table 5-2 -Refer to Table 5-2.Using the Midpoint Method,which of the Three