At price of $1.25,a paper manufacturer is willing to supply 150 spiral notebooks per day.At a price of $1.50,the paper manufacturer is willing to supply 175 spiral notebooks per day.Using the midpoint method,the price elasticity of supply is about
A)1.18.
B)1.00.
C)0.85.
D)0.25.

Question

Quizplus · Accepted Answer

Using the midpoint method, the percentage change in quantity supplied is:

[(175-150)/((175+150)/2)]*100% = 15.38%

The percentage change in price is:

[(1.50-1.25)/((1.50+1.25)/2)]*100% = 16.67%

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price:

15.38%/16.67% = 0.923

Since the question asks for the absolute value of the elasticity, the answer is 0.923, which is closest to 0.85 (choice C).

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