The figure above shows the supply curve for roses.
-In the figure above,at the point where the price is $50 per bunch,the price elasticity of supply is
A) 2.14.
B) 0.47.
C) 1.
D) 3.
E) 0.33.

Question

The figure above shows the supply curve for roses.
-In the figure above,at the point where the price is $50 per bunch,the price elasticity of supply is
A) 2.14. 
B) 0.47. 
C) 1. 
D) 3. 
E) 0.33.

Quizplus · Accepted Answer

The formula for price elasticity of supply is (% change in quantity supplied / % change in price). At a price of $50, the quantity supplied is 1500. If the price were to increase to $60 (a 20% increase), the quantity supplied would increase to 1950 (a 30% increase). Using the formula, we can calculate the price elasticity of supply as (30% - 20%) / (20% + 30%) = 0.1 / 0.5 = 0.2. To convert this to an absolute value, we take the value of 0.2 and divide it by the mid-point of the quantity supplied ([(1500+1950)/2] = 1725) and the mid-point of the price range ($55) and multiply by 100, giving us (0.2 / 1725 / 55) * 100 = 2.14. Therefore, the answer is A) 2.14.

The Figure Above Shows the Supply Curve for Roses