Suppose the price of the hiring of a velodrome increased from $1550 to $1650. As a result, the number of hiring´s the owner allow rose from 490 to 510 per annum. Calculate the elasticityof quantity supplied of hiring´s with respect to the price of hiring?
Big thank you for any help.
To calculate the elasticity of quantity supplied of hirings with respect to the price of hiring, we can use the formula:
Elasticity = (% Change in Quantity Supplied) / (% Change in Price)
First, let's calculate the percentage change in quantity supplied. The initial quantity supplied is 490, and the final quantity supplied is 510.
% Change in Quantity Supplied = [(Final Quantity Supplied - Initial Quantity Supplied) / Initial Quantity Supplied] * 100
% Change in Quantity Supplied = [(510 - 490) / 490] * 100
% Change in Quantity Supplied = (20 / 490) * 100
% Change in Quantity Supplied = 4.08%
Next, let's calculate the percentage change in price. The initial price is $1550, and the final price is $1650.
% Change in Price = [(Final Price - Initial Price) / Initial Price] * 100
% Change in Price = [(1650 - 1550) / 1550] * 100
% Change in Price = (100 / 1550) * 100
% Change in Price = 6.45%
Now, we can calculate the elasticity of quantity supplied:
Elasticity = (% Change in Quantity Supplied) / (% Change in Price)
Elasticity = 4.08% / 6.45%
Elasticity = 0.632
Therefore, the elasticity of quantity supplied of hirings with respect to the price of hiring is 0.632.