Question

At a price of $3.50 per loaf, a bakery is willing to supply 450 loaves of bread per week. At a price of $4.00 per loaf, the bakery is willing to supply 550 loaves per week. Using the midpoint method, the price elasticity of supply is about... (round answer to 2 decimal places)

Answer 1

Answer:

Price elasticity of supply is 1.5

Explanation:

Given:

Price (P₀) = $3.50

Quantity (Q₀) = 450

New price (P₁) = $4.00

New quantity (Q₁) = 550

Price elasticity of supply = ?

Computation of price elasticity of supply using midpoint method:

$Price\ elasticity\ of\ supply =\frac{\frac{Q1-Q0}{\frac{Q1+Q0}{2} } }{\frac{P1-P0}{\frac{P1+P0}{2} } }$

$Price\ elasticity\ of\ supply =\frac{\frac{550-450}{\frac{550+450}{2} } }{\frac{4-3.5}{\frac{4+3.5}{2} } }$

$Price\ elasticity\ of\ supply =\frac{\frac{100}{500} }{\frac{0.50}{3.75} }\\\\Price\ elasticity\ of\ supply = 1.5$