Consider the following supply schedule of handsets
(Table)
Price(zw) quantity supplied
2 25
4 35
6 45
8 55
10 65
12 75
1. Plot the curve on a graph
2. Calculate the elasticity of supply a price k4 and at price k10
3. supposed a rise in cost of production causes the producer to reduce supply by 15 units at every price. Repeat exercise (1)&(2) above
4. Discuss any four(4) determinants of the supply of handsets.
(Assignment form)
1. Graph:
Price(zw) quantity supplied
2 25
4 35
6 45
8 55
10 65
12 75
2. Elasticity of supply:
- At price k4:
Elasticity of supply = (% change in quantity supplied / % change in price)
= ((35-25)/25) / ((4-2)/2)
= (10/25) / (2/2)
= 0.4 / 1
= 0.4
- At price k10:
Elasticity of supply = (% change in quantity supplied / % change in price)
= ((65-55)/55) / ((10-8)/8)
= (10/55) / (2/8)
= 0.182 / 0.25
= 0.728
3. With a reduction in supply by 15 units at every price:
Price(zw) quantity supplied
2 10
4 20
6 30
8 40
10 50
12 60
Elasticity of supply:
- At price k4:
= ((20-10)/10) / ((4-2)/2)
= 0.5 / 1
= 0.5
- At price k10:
= ((50-40)/40) / ((10-8)/8)
= 0.25 / 0.25
= 1
4. Determinants of the supply of handsets:
- Cost of production: As mentioned in the question, a rise in the cost of production can lead to a decrease in supply.
- Technology: Advances in technology can increase the efficiency of production, leading to an increase in the supply of handsets.
- Prices of inputs: The prices of inputs like labor and raw materials can affect the cost of production and ultimately the supply of handsets.
- Government policies: Taxes, subsidies, and regulations can all impact the supply of handsets by influencing production costs and market conditions.