If the price of DVDs falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 to 100,000, using the midpoint formula the elasticity of supply equals
A) 0.33.
B) 2.94.
C) -3.08.
D) 3.08.
E) 0.23.

Question

Quizplus · Accepted Answer

The elasticity of supply is calculated using the midpoint formula: [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Plugging in the values: [(100,000 - 118,000) / (109,000)] / [($12 - $20) / ($16)] = (-18,000 / 109,000) / (-8 / 16) = 0.33.

If the Price of DVDs Falls from $20 to $12