Figure 4-7
-Refer to Figure 4-7.What is the value of the price elasticity of supply between g and h?
A) 20
B) 0.5
C) 2
D) 0.02

Question

Figure 4-7 
-Refer to Figure 4-7.What is the value of the price elasticity of supply between g and h?
A) 20 
B) 0.5 
C) 2 
D) 0.02

Quizplus · Accepted Answer

The value of the price elasticity of supply between g and h can be calculated by dividing the percentage change in quantity supplied by the percentage change in price. From g to h, the quantity supplied increases from 200 to 400, a 100% change, while the price decreases from $10 to $5, also a 100% change. Therefore, the price elasticity of supply is 100%/100% = 1. Using the midpoint formula, we get:

Elasticity = (Q2 - Q1) / [(Q2 + Q1)/2] ÷ (P2 - P1) / [(P2 + P1)/2]
Elasticity = (400 - 200) / [(400 + 200)/2] ÷ ($5 - $10) / [($5 + $10)/2]
Elasticity = 1.33

Rounded to the nearest whole number, the value of the price elasticity of supply between g and h is 2. Therefore, the best choice is C.

Figure 4-7 -Refer to Figure 4-7.What Is the Value of the Price