Given that the supply curve for motor oil is P = 2 + 4Q,then at a price of $14,the price elasticity of supply is

Question

Quizplus · Accepted Answer

To calculate the price elasticity of supply at a price of $14, we need to use the following formula:

Elasticity = (% change in quantity supplied) / (% change in price)

We know that the supply function is P = 2 + 4Q, so we can derive the inverse supply function as:

Q = (P - 2) / 4

Plugging in P = 14, we get:

Q = (14 - 2) / 4 = 3

Now, let's assume that the price increases by 1%. This means that the new price is:

P' = 14 * (1 + 0.01) = 14.14

Using the inverse supply function, we can find the new quantity supplied:

Q' = (14.14 - 2) / 4 = 3.04

The percentage change in quantity supplied is therefore:

% change in quantity supplied = (Q' - Q) / Q = (3.04 - 3) / 3 = 0.0133

Similarly, the percentage change in price is:

% change in price = (P' - P) / P = (14.14 - 14) / 14 = 0.01

Now we can calculate the price elasticity of supply:

Elasticity = (% change in quantity supplied) / (% change in price) = 0.0133 / 0.01 = 1.167

Therefore, the answer is B. At a price of $14, the price elasticity of supply is 1.167.

Given That the Supply Curve for Motor Oil Is P