A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each.At a price of $20.00,the t-shirt maker would be willing to supply 100 t-shirts.Using the midpoint method,the price elasticity of supply for t-shirts is about
A)0.37,and supply is elastic.
B)0.37,and supply is inelastic.
C)2.71,and supply is elastic.
D)2.71,and supply is inelastic.

Question

Quizplus · Accepted Answer

Using the midpoint method formula:

Elasticity of supply = ( % change in quantity supplied ) / ( % change in price )

% change in quantity supplied = ( 100 - 75 ) / ( ( 75 + 100 ) / 2 ) x 100% = 22.22%

% change in price = ( 20 - 18 ) / ( ( 18 + 20 ) / 2 ) x 100% = 11.11%

Elasticity of supply = 22.22% / 11.11% = 2

Since the elasticity of supply is greater than 1, it indicates that supply is elastic. Therefore, the correct answer is C.

A T-Shirt Maker Would Be Willing to Supply 75 T-Shirts