When the price of paper increases from $150 to $155per ton, the quantity supplied increases from 250 to 280 tons per day. The price elasticity of supply is
0.250.25. (Enter your response rounded to two decimal places.)
To calculate the price elasticity of supply, we need the following formula:
Price Elasticity of Supply = ((% Change in Quantity Supplied) / (% Change in Price))
First, let's calculate the percentage change in quantity supplied:
% Change in Quantity Supplied = ((New Quantity Supplied - Initial Quantity Supplied) / Initial Quantity Supplied) * 100
% Change in Quantity Supplied = ((280 - 250) / 250) * 100
% Change in Quantity Supplied = (30 / 250) * 100
% Change in Quantity Supplied = 0.12 * 100
% Change in Quantity Supplied = 12%
Next, let's calculate the percentage change in price:
% Change in Price = ((New Price - Initial Price) / Initial Price) * 100
% Change in Price = ((155 - 150) / 150) * 100
% Change in Price = (5 / 150) * 100
% Change in Price = 0.0333 * 100
% Change in Price = 3.33%
Now, we can calculate the price elasticity of supply:
Price Elasticity of Supply = (12% / 3.33%)
Price Elasticity of Supply ≈ 3.61
Therefore, the price elasticity of supply is approximately 3.61.
To calculate the price elasticity of supply, we will use the formula:
Price Elasticity of Supply = (% change in quantity supplied) / (% change in price)
To find the % change in quantity supplied, we first calculate the difference between the initial and final quantities:
Change in quantity = final quantity - initial quantity = 280 tons - 250 tons = 30 tons
Next, we calculate the % change in quantity supplied:
% change in quantity supplied = (change in quantity / initial quantity) * 100% = (30 tons / 250 tons) * 100% = 12%
To find the % change in price, we calculate the difference between the final and initial prices:
Change in price = final price - initial price = $155 - $150 = $5
Next, we calculate the % change in price:
% change in price = (change in price / initial price) * 100% = ($5 / $150) * 100% = 3.33%
Finally, we can calculate the price elasticity of supply:
Price Elasticity of Supply = (% change in quantity supplied) / (% change in price) = 12% / 3.33% = 3.60
Rounded to two decimal places, the price elasticity of supply is 3.60.