At price of 1.25 dollars,a paper manufacturer is willing to supply 150 spiral notebooks per day.At a price of 1.50 dollars,the paper manufacturer is willing to supply 175 spiral notebooks per day.Using the midpoint method,the price elasticity of supply is about
A)1.18.
B)1.00.
C)0.85.
D)0.25.

Question

Quizplus · Accepted Answer

Using the midpoint method, we have:

Price elasticity of supply = (percentage change in quantity supplied) / (percentage change in price)

First, let's calculate the percentage change in quantity supplied:

((175-150)/(175+150))/2 = 0.0833

Next, let's calculate the percentage change in price:

((1.50-1.25)/(1.50+1.25))/2 = 0.0833

Now, we can calculate the price elasticity of supply:

0.0833 / 0.0833 = 1

Therefore, the price elasticity of supply is 1, which means supply is unit elastic. However, none of the answer choices match this result. The closest answer choice is C, which is 0.85. This suggests a slightly less elastic supply, but still relatively close to being unit elastic.

At Price of 1