In a competitive market where the elasticity of the market demand curve is -1.5,the number of firms is 20,and an individual firm faces a residual demand curve with an elasticity of -68.What is the elasticity of the supply curve?
A) 0.5
B) 1.2
C) 2
D) Cannot be determined.

Question

Quizplus · Accepted Answer

The elasticity of the supply curve can be determined using the formula: 1/E_s = 1/E_d - 1/E_rd, where E_s is the elasticity of supply, E_d is the elasticity of market demand, and E_rd is the elasticity of the residual demand. Substituting the given values: 1/E_s = 1/(-1.5) - 1/(-68), solving gives E_s = 2.

In a Competitive Market Where the Elasticity of the Market