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

The midpoint method for calculating elasticity is given by the formula: [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)], where Q1 and Q2 are the initial and final quantities, and P1 and P2 are the initial and final prices. Plugging in the given values: [(130,000 - 100,000) / ((130,000 + 100,000) / 2)] / [($8 - $7) / (($8 + $7) / 2)] = 30,000 / 115,000 / 1 / 7.5 = 0.2609 / 0.1333 ≈ 1.96.

Suppose the Current Price of Barley Is $7 Per Bushel