Suppose that when the price of novels goes from $15 to $20 per book,production increases from 550 million books per year to 800 million books.Using the mid-point method,the price elasticity of supply would be:
A)0.77.
B)28.5 percent.
C)37 percent.
D)1.4.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated using the mid-point method as the percentage change in quantity supplied divided by the percentage change in price. The percentage change in quantity is ((800 - 550) / ((800 + 550) / 2)) * 100 = 37.5%. The percentage change in price is ((20 - 15) / ((20 + 15) / 2)) * 100 = 28.57%. The elasticity is 37.5% / 28.57% = 1.31, which rounds to 1.4.

Suppose That When the Price of Novels Goes from $15