Economics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn

Exercise 6

ADVANCED ANALYSIS Currently, at a price of $1 each, 100 popsicles are sold per day in the perpetually hot town of Rostin. Consider the elasticity of supply. In the short run, a price increase from $1 to $2 is unit-elastic ( E s = 1.0). So how many popsicles will be sold each day in the short run if the price rises to $2 each? In the run, a price increase from $1 to $2 has an elasticity of supply of 1.50. So how many popsicles will be sold per day in the run if the price rises to $2 each? (Hint: Apply the midpoints approach to the elasticity of supply.)