your friend rita sells live bamboo trees. she's willing to supply 100 5-gallon buckets of bamboo trees for 80 dollars a bucket,

Question

2 years ago

12

your friend rita sells live bamboo trees. she's willing to supply 100 5-gallon buckets of bamboo trees for 80 dollars a bucket,

and she's willing to supply 200 at that price. what is the mathematical value of rita's price elasticity of supply and how would you categorize her supply elasticity?

Advanced Placement (AP)

1 answer:

Kryger [21] · Answer 1 · 2022-05-03T01:10:16+03:00

Answer:

E_s = 0.9

It's inelastic

Explanation:

Formula for elasticity of supply is;

E_s = % change in quantity supplied/% change in price

The percentage will cancel out so, we are left with;

E_s = change in quantity supplied/ change in price

Change in quantity supplied = (200 - 100)/((200 + 100)/2) = 3/5

Price for 100 buckets = 100 × 80 =$8000

Price for 200 buckets = 200 × 80 = $16000

Change in price = (16000 - 8000)/((8000 + 16000)/2) = 2/3

Thus:

E_s = (3/5) ÷ (2/3)

E_s = 0.9

Now, this price elasticity supply value is less than 1. Thus, it can be categorized as being inelastic.