Consider the following market supply: QS = c, where c > 0. At price P = 0.5(a/b), the absolute...
Question:
Consider the following market supply: QS = c, where c > 0. At price P = 0.5(a/b), the absolute value of the price elasticity of this market supply is e. (NOTE: Write your answer in number format, with 2 decimal places of precision level; do not write your answer as a fraction. Add a leading zero and trailing zeros when needed.
HINTS: First compute the expression for the price elasticity of this market supply. Next, compute the market quantity supplied at P = 0.5(a/b). Finally, substitute your P and QS values into your expression of the price elasticity of this market supply, to determine the absolute value of the price elasticity at that point.)
The Price Elasticity of Supply:
The price elasticity of supply measures the change in the quantity supplied of a good or service when the price of the product increases or decreases by a given amount. It is normally expressed as the ratio of the percentage change in the quantity supplied to the percentage change in the price of the product.
Answer and Explanation: 1
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View this answerThe price elasticity of supply at a point is calculated as:
- {eq}E_s = \dfrac{\Delta Qs}{\Delta P}\times \dfrac{P}{Qs} {/eq}
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Price Elasticity of Supply in Microeconomics
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Chapter 2 / Lesson 14
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Understand what elasticity of supply is. Learn more about price elasticity of supply. Know about elastic and inelastic supply with some elastic supply examples.
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