At a price of $40 comma 000
,
producers of midsized automobiles are willing to manufacture and sell 100 comma 000
cars per month. At a price of $45 comma 000
,
they are willing to produce and sell 140 comma 000
a month.
Part 2
The price elasticity of supply is---.
In order to calculate the price elasticity of supply, we need to use the following formula:
Price elasticity of supply = (% change in quantity supplied) / (% change in price)
To calculate the % change in quantity supplied, we can use the formula:
% change in quantity supplied = (new quantity supplied - initial quantity supplied) / initial quantity supplied
And to calculate the % change in price, we can use the formula:
% change in price = (new price - initial price) / initial price
Using the given information:
Initial quantity supplied = 100,000
New quantity supplied = 140,000
Initial price = $40,000
New price = $45,000
% change in quantity supplied = (140,000 - 100,000) / 100,000 = 40%
% change in price = (45,000 - 40,000) / 40,000 = 12.5%
Price elasticity of supply = 40% / 12.5% = 3.2
Therefore, the price elasticity of supply is 3.2.
The price elasticity of supply is 2.8.
Based on your answer, supply is
a. elastic
b. .unit elastic
c. inelastic
.
Based on the calculated price elasticity of supply of 2.8, supply is considered to be elastic.
To calculate the price elasticity of supply, we need to use the formula:
Price Elasticity of Supply = Percentage change in quantity supplied / Percentage change in price
First, let's calculate the percentage change in quantity supplied:
Change in quantity supplied = 140,000 - 100,000 = 40,000
Percentage change in quantity supplied = (Change in quantity supplied / Initial quantity supplied) * 100
= (40,000 / 100,000) * 100
= 40%
Next, let's calculate the percentage change in price:
Change in price = $45,000 - $40,000 = $5,000
Percentage change in price = (Change in price / Initial price) * 100
= ($5,000 / $40,000) * 100
= 12.5%
Now, we can substitute these values into the formula:
Price Elasticity of Supply = (Percentage change in quantity supplied / Percentage change in price)
= 40% / 12.5%
= 3.2
Therefore, the price elasticity of supply is 3.2.
To calculate the price elasticity of supply (PES), we need to use the formula:
PES = ((Q2 - Q1) / Q1) / ((P2 - P1) / P1)
Here's how to get the answer:
Step 1: Identify the initial quantity and price.
Initial quantity (Q1) = 100,000 cars per month
Initial price (P1) = $40,000
Step 2: Identify the final quantity and price.
Final quantity (Q2) = 140,000 cars per month
Final price (P2) = $45,000
Step 3: Calculate the percentage change in quantity using the formula:
Percentage change in quantity = ((Q2 - Q1) / Q1)
Percentage change in quantity = ((140,000 - 100,000) / 100,000)
Step 4: Calculate the percentage change in price using the formula:
Percentage change in price = ((P2 - P1) / P1)
Percentage change in price = ((45,000 - 40,000) / 40,000)
Step 5: Calculate the price elasticity of supply using the formula:
PES = (Percentage change in quantity) / (Percentage change in price)
PES = (((140,000 - 100,000) / 100,000) / ((45,000 - 40,000) / 40,000))
Now, you can calculate the price elasticity of supply using the given data in Part 1.