Question

Ana is a stay-at-home parent who lives in Dallas and provides math tutoring for extra cash. At a wage of $25 per hour, she is willing to tutor 4 hours per week. At $40 per hour, she is willing to tutor 10 hours per week. Using the midpoint method, the elasticity of Beth's labor supply between the wages of $25 and $40 per hour is approximately (______ ), which means that Beth's supply of labor over this wage range is (_____ ).

Answer 1

Answer:

1.86 and elastic

Explanation:

The computation of the price elasticity of supply using the mid point method is shown below:

= (change in quantity supplied ÷ average of quantity supplied) ÷ (percentage change in price ÷ average of price)  

where,  

Change in quantity supplied is

= Q2 - Q1

= 10 - 4

= 6

And, average of quantity supplied is

= (10 + 4) ÷ 2

= 7

Change in price would be

= P2 - P1

= $40 - $25

= $15

And, average of price would be

= ($40 + $25) ÷ 2

= 32.5

So, after solving this, the price elasticity of supply is 1.86

Since the price elasticity is more than one so it is a elastic

Answer 2

Answer:

Beth's Elasticity of Supply (Midpoint Method) : 10.11 ; Supply : Highly Elastic

Explanation:

By Midpoint method , Elasticity of supply formula is :-

[ Q2 - Q1 ] / [ (Q2 + Q1)/2 ]

[ P2 - P1] / [ (P2 + P1) / 2 ]

Putting the given following values in the formula ; we get :-

P1 = 25 ; P2 = 40 ; Q1 = 4 ; Q2 = 10

[ 40 + 25 ] / [ (40 - 25) / 2]

[ 10 - 4 ] / [ (10 + 4) / 2 ]

65 / 7.5

6 / 7

8.6 / 0.85

= 10.11

Beth's Elasticity of supply is much higher than one ; So his supply is Highly Elastic.