Question

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about.

Answer 1

Answer:

1.63

Explanation:

The computation of the pricing elasticity of supply using the midpoint method is shown below:

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

where,  

Change in quantity supplied would be

= Q2 - Q1

= 1,100 - 500

= 600

And, the average of quantity supplied is

= (1,100 + 500) ÷ 2

= 800

Change in price would be

= P2 - P1

= $0.80 - $0.50

= $0.30

And, average of price would be

= ($0.80 + $0.50) ÷ 2

= 0.65

So, after solving this, the price elasticity of supply is 1.63