If a firm supplies 200 units at a price of $50 and 100 units at a price of $40,using the midpoint method,what is the price elasticity of supply?
A) 0.33
B) 1.00
C) 3.00
D) 5.00
E) 8.50

Question

Quizplus · Accepted Answer

The price elasticity of supply (PES) using the midpoint method is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, the change in quantity supplied is from 100 to 200 units (a change of 100 units), and the change in price is from $40 to $50 (a change of $10). Using the midpoint formula, PES = [(200 - 100) / ((200 + 100) / 2)] / [($50 - $40) / (($50 + $40) / 2)] = (100 / 150) / (10 / 45) = (2/3) / (2/9) = 3.00.

If a Firm Supplies 200 Units at a Price of $50