A manufacturer produces 410 units when the market price is $8 per unit and produces 470 units when the market price is $10 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about
A)1.63.
B)0.14.
C)0.61.
D)0.22.

Question

Quizplus · Accepted Answer

The midpoint method for calculating price elasticity of supply is: [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Substituting the given values: [(470 - 410) / (470 + 410) / 2] / [(10 - 8) / (10 + 8) / 2] = 60 / 440 / 2 / 2 / 9 = 0.61.

A Manufacturer Produces 410 Units When the Market Price Is