Question
In: Economics
When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More...
When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More recently, the price of a gizmo has fallen to $9 and so Gizmo is only producing 2,000 units per month. What is the price elasticity of supply for gizmos?
A.
minus−0.47
B.
0.47
C.
minus−2.11
D.
2.11
Solutions
Expert Solution
Ans: 2.11
Explanation:
P1 = 10 Q1 = 2500
P2 = 9 Q2 = 2000
Price elasticity of supply = (Q2 - Q1) / (P2 - P1) * (P1 + P2) / (Q1 + Q2)
= (2000 - 2500) / (9 - 10) * (10 + 9) / (2500 + 2000)
= (-500 / -1) * (19 / 4500)
= -9500 / -4500
= 2.11
Thus, option [D] is correct answer.
Rahul Sunny answered 8 months agoRelated Solutions
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