Question

Consider the market for a natural? resource, where the price is initially ?$12,000 per ton and 12,000 thousand tons are supplied.

Suppose the price of the resource falls to ?$11,000 per? ton, at which price the market supplies 11,000

thousand tons.

What is the price elasticity of supply between these? prices?

Using the midpoint? formula, the price elasticity of supply is _______(Enter your response as a real number rounded to two decimal? places.)

Answer 1

Price Elasticity of Supply:
Change in price: 12000-11000 = -$ 1000 per ton
Initial Price: $ 12000 per ton
% change in Supply: Change in supply/ Initial price *100
		1000 / 12000 *100 = - 8.33%
Change in Supply: 12000-11000 = -1000
Initial Supply: 12000 tonnes
% change in Supply = Change in supply/ Initial Supply *100
		1000 /12000 *100 = -8.33%
Price elasticity of supply: % change in supply/ % change in price = -8.33% / -8.33% = 1.00
Price Elasticity of Supply (Using Mid point)
Change in Price: -1000
Avrrage Pricec (11000+12000)/2= 11500
change in Quantity: -1000
Average Quantity (11000+12000)/2= 11500
% change in Price: - 1000 /11500*100= -8.70%
% change in Supply: - 1000 /11500 *100 = - 8.70%
Price elasticity of demand: % change in Supply/% change in price = -8.70% /-8.70% = 1.00