The price of one bedroom apartments in Cheyenne increased from $55,000 to $65,000 and the quantity of apartment for sale increased from 25 to 30.Using the midpoint method,the price elasticity of supply for apartments in Cheyenne is equal to
A) 0.916.
B) 0.75.
C) 1.09.
D) 2.18.
E) 0.08.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Using the midpoint method, the percentage change in quantity supplied is (30-25)/((30+25)/2) = 0.2. The percentage change in price is (65000-55000)/((65000+55000)/2) = 0.1818. Therefore, the price elasticity of supply is 0.2/0.1818 = 1.09.

The Price of One Bedroom Apartments in Cheyenne Increased from $55,000