The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the government of Prince Edward Island raises the minimum wage rises from $10.00 per hour to $10.25.Using the midpoint formula, calculate the approximate change in the quantity supplied of teenage labour.
A)17.3 percent
B)24.4 percent
C)3)4 percent
D)There is insufficient information to answer the question.

Question

Quizplus · Accepted Answer

Using the midpoint formula, the percent change in quantity supplied is:
[(Q2 - Q1) / ((Q1 + Q2) / 2)] x 100%
Assuming that the initial quantity supplied is Q1 and it increases by x% to become Q2, then we can rearrange the formula to solve for x:
x = [(Q2 - Q1) / ((Q1 + Q2) / 2)] x 100%
Given that the price elasticity of supply is 1.36, we know that:
x = 1.36 x (($10.25 - $10.00) / (($10.00 + $10.25) / 2)) x 100%
x = 1.36 x (0.25 / $10.125) x 100%
x ≈ 3.98%
Therefore, the approximate change in the quantity supplied of teenage labour is 3.98%, which is closest to option C (4 percent).

The Price Elasticity of the Supply of Teenage Labour Services