When the price of paper increases from $150 to $157
per ton, the quantity supplied increases from 200 to 210 tons per day. The price elasticity of supply is?
30
To find the price elasticity of supply, we need to use the formula:
Price Elasticity of Supply = (% Change in Quantity Supplied) / (% Change in Price)
First, we need to calculate the percentage change in quantity supplied:
% Change in Quantity Supplied = ((New Quantity Supplied - Old Quantity Supplied) / Old Quantity Supplied) * 100
% Change in Quantity Supplied = ((210 - 200) / 200) * 100 = (10/200) * 100 = 5%
Next, we need to calculate the percentage change in price:
% Change in Price = ((New Price - Old Price) / Old Price) * 100
% Change in Price = (($157 - $150) / $150) * 100 = (7/150) * 100 = 4.67%
Now, we can plug these values into the price elasticity of supply formula:
Price Elasticity of Supply = (% Change in Quantity Supplied) / (% Change in Price)
Price Elasticity of Supply = 5% / 4.67% ≈ 1.07
Therefore, the price elasticity of supply is approximately 1.07.