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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

From the data in Table 5.6 about supply of alarm clocks, calculate the price elasticity of supply from: point J to point K, point L to point M, and point N to point P. Classify the elasticity at each point as elastic, inelastic, or unit elastic.

Chapter 5, Problem 2SCQ, From the data in Table 5.6 about supply of alarm clocks, calculate the price elasticity of supply

To determine

Calculate the elasticity of supply at various points on the supply curve and classify them as inelastic, unit elastic and elastic.

Explanation

Let’s calculate the price elasticity of supply from point J to K:

e =  ΔQ ΔP × P Q

e =  2,6002,800 8070 × 70 2,800

e =  200 10 ×0.025

e = (-) -20 ×0.025

e = 0.5

Therefore, the price elasticity of supply from point J to K is 3.2. Since the elasticity of supply is more than 1, the supply is elastic, which means there is large change in quantity supplied as compared to the change in price level.

Let’s calculate the price elasticity of supply from point L to M:

e =  ΔQ ΔP × P Q

e =  8880 1110 × 10 80

e =  8 1 ×0

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