If the price of a DVD falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 per hour to 100,000 per hour,using the midpoint formula the elasticity of supply equals
A) 0.33.
B) 2.94.
C) 3.08.
D) 0.23.
E) -3.08.

Question

Quizplus · Accepted Answer

The elasticity of supply is calculated using the midpoint formula: [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Substituting the given values: [(100,000 - 118,000) / (109,000)] / [(12 - 20) / (16)] = (-18,000 / 109,000) / (-8 / 16) = -0.1651 / -0.5 = 0.33.

If the Price of a DVD Falls from $20 to $12