Holding all other factors constant and using the midpoint method,if a calculator manufacturer increases production from 40 to 50 units when price increases by 20 percent,then supply is
A) inelastic, since the price elasticity of supply is equal to .91.
B) inelastic, since the price elasticity of supply is equal to 1.1.
C) elastic, since the price elasticity of supply is equal to 0.91.
D) elastic, since the price elasticity of supply is equal to 1.1.

Question

Quizplus · Accepted Answer

Using the midpoint method, the percentage change in quantity supplied is [(50-40)/((50+40)/2)]*100 = 22.22%. The percentage change in price is 20%. The price elasticity of supply is 22.22%/20% = 1.11, which is greater than 1, indicating that supply is elastic.

Holding All Other Factors Constant and Using the Midpoint Method,if