Question

Label each scenario with the term that best describes it. Use the midpoint method when applicable. Marcel Duchamp was a famous artist prior to his death, and was known for his Dada artwork, including works such as "Soft Toilet". All of his original sculptures and paintings go on sale. Paul owns a Tim Horton's, a famous donut and coffee franchise. He is willing to sell as many maple glazed donuts as customers want at a price of $1.00 each, but he refuses to sell any donuts for any price lower than $1.00. The price of facial tissues rises from $2.85 per box to $3.15. As a result, P&G increases production from 15 million boxes to 25 million boxes of facial tissue. With the school semester starting for both high school and college, Papermate chooses to increase production of pens from 38 million to 42 million after global prices of writing instruments increase from $1.90 a package to $2.10 a package. Bright Ideas increases its production of lightbulbs by 15% after a 400% increase in the price of fluorescent bulbs.a. elastic supply.b. perfectly inelastic supply.c. perfectly elastic supply.d. inelastic supply.e. unit-elastic supply.

Answer 1

Answer:

• Paul Donut Franchisee : Perfectly Elastic Supply
• P & G Facial Tissues : Elastic Supply
• Papermate Pens : Inelastic Supply
• Bright Ideas Lightbulbs : Perfectly Inelastic Supply

Explanation:

Price Elasticity of Supply is sellers' quantity supplied response to price change. P(Es) = % change in supply / % change in price.

Supply can be classified by Price Elasticity of Supply, as undermentioned :

1. Elastic Supply : P(Es) > 1 ; % change in supply > % change in price
2. Inelastic Supply :  P(Es) < 1 ; % change in supply < % change in price
3. Unitary Elastic : P (Es) = 1 ; % change in supply = % change in price
4. Perfectly Elastic Supply : P(Es) = ∞ ; Supply responds infinitely to any slight price change & so prices are constant.
5. Perfectly Elastic Supply : P (Es) = 0 ; Supply responds negligibly to massive price change & so quantity supplied is constant

• Paul Donut Franchise : Unlimited Supply at constant price, so supply perfectly elastic
• P & G facial tissues : % change in supply i.e 66% > % change in price i.e 10% , so supply is elastic
• Papermate pens : % change in supply i.e 10 % < % change in price i.e 15% , so supply is inelastic
• Bright Ideas Lightbulbs : % change in supply 15% negligible in relation to 400% price change , so supply is perfectly inelastic