Suppose the current price of barley is $7 per bushel and at that price 100,000 bushels are grown by a Colorado farmer.If the price of barley rises to $8 and quantity supplied increases to 130,000 bushels,then using the midpoint method,the price elasticity of supply for barley equals
A) 13.33.
B) 26.78.
C) 1.96.
D) 0.51.
E) Zero.

Question

Quizplus · Accepted Answer

Price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Using the midpoint method:

Price elasticity of supply = [(130,000 - 100,000) / ((130,000 + 100,000)/2)] / [(8 - 7) / ((8 + 7)/2)]

Price elasticity of supply = [(30,000/115,000)] / [(1/7)]

Price elasticity of supply = [0.2609] / [0.1429]

Price elasticity of supply = 1.826

Round it off to two decimal places, the price elasticity of supply for barley equals 1.96.

Suppose the Current Price of Barley Is $7 Per Bushel