Suppose when the price of shoe laces goes from $1 to $2 per pair,production increases from 95 million pairs to 105 million pairs per year.Using the mid-point method,the price elasticity of supply is:
A) 6.28
B) 66 percent
C) 10.5 percent
D) 0.15

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 (105-95)/((105+95)/2) = 10/100 = 0.1 or 10%. The percentage change in price is (2-1)/((2+1)/2) = 1/1.5 = 0.67 or 67%. The elasticity is 0.1/0.67 = 0.15.

Suppose When the Price of Shoe Laces Goes from $1