Question

An increase in the market price of​ men's haircuts, from ​$16 per haircut to ​$26 per​ haircut, initially causes a local barbershop to have its employees work overtime to increase the number of daily haircuts provided from 45 to 50. When the ​$26 market price remains unchanged for several weeks and all other things remain equal as​ well, the barbershop hires additional employees and provides 65 haircuts per day. What is the​ short-run price elasticity of​ supply? nothing ​(Your answer should have two decimal places.​)

Answer 1

In the short-run, P1 = 16 , Q1 = 45

                           P2 = 26 , Q2 = 50

PES = (Q2 - Q1) / (P2 - P1) * (P1 + P2) / (Q1 + Q2)

        = (50 - 45) / (26 - 16) * (16 + 26) / (45 + 50)

        = (5 / 10) * (42 / 95)

         = 0.22

In the long-run, P1 = 16 , Q1 = 45

                           P2 = 26 , Q2 = 65

PES = (Q2 - Q1) / (P2 - P1) * (P1 + P2) / (Q1 + Q2)

        = (65 - 45) / (26 - 16) * (16 + 26) / (45 + 65)

        = (20 / 10) * (42 / 110)

         = 0.76