3. The following table gives the supply schedule for Purcell Ltd, a UK based rug producer. Price (£) 10 Quantity Supplied (Qs) 0 20 15 30 21 40 28 (1) What does the price elasticity of supply (PES) measure? How is it calculated? Write down the full formulae. (iii) Assume that the current price is £20. Calculate the price elasticity of supply if the price increases to £30 (show all your calculations). (iv) Is supply elastic, unit-elastic, or inelastic? Explain why. What would the slope of the supply curve look like? (Hint: Relatively flat or steep supply curve) Based on your calculation and your analysis, draw the supply curve for Purcell Ltd. (vi) Would you expect the PES of rugs to be different in the short term and the long term? Explain your answer in detail.
3. The following table gives the supply schedule for Purcell Ltd, a UK based rug producer. Price (£) 10 Quantity Supplied (Qs) 0 20 15 30 21 40 28 (1) What does the price elasticity of supply (PES) measure? How is it calculated? Write down the full formulae. (iii) Assume that the current price is £20. Calculate the price elasticity of supply if the price increases to £30 (show all your calculations). (iv) Is supply elastic, unit-elastic, or inelastic? Explain why. What would the slope of the supply curve look like? (Hint: Relatively flat or steep supply curve) Based on your calculation and your analysis, draw the supply curve for Purcell Ltd. (vi) Would you expect the PES of rugs to be different in the short term and the long term? Explain your answer in detail.
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 3.6P: (Price Elasticity of Supply) Calculate the price elasticity of supply for each of the following...
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Transcribed Image Text:3. The following table gives the supply schedule for Purcell Ltd, a UK based rug producer.
Price (£)
Quantity Supplied (Qs)
10
0
20
15
30
21
40
28
(i)
What does the price elasticity of supply (PES) measure?
(ii)
How is it calculated? Write down the full formulae.
(iii)
Assume that the current price is £20. Calculate the price elasticity of supply if the price
increases to £30 (show all your calculations).
(iv)
Is supply elastic, unit-elastic, or inelastic? Explain why.
(v)
What would the slope of the supply curve look like? (Hint: Relatively flat or steep
supply curve) Based on your calculation and your analysis, draw the supply curve for
Purcell Ltd.
(vi)
Would you expect the PES of rugs to be different in the short term and the long
term? Explain your answer in detail.
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