Holding all other factors constant and using the midpoint method,if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60,then supply is
A)inelastic,since the price elasticity of supply is equal to .91.
B)inelastic,since the price elasticity of supply is equal to 1.1.
C)elastic,since the price elasticity of supply is equal to 0.91.
D)elastic,since the price elasticity of supply is equal to 1.1.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated using the midpoint method as (20% change in quantity supplied) / (20% change in price), which equals 1.1. Since the elasticity is greater than 1, the supply is elastic.

Holding All Other Factors Constant and Using the Midpoint Method,if