Question

11. Calculating the price elasticity of supply Charles is a retired teacher who lives in New York City and provides math tutoring for extra cash. At a wage of $50 per hour, he is willing to tutor 10 hours per week. At $65 per hour, he is willing to tutor 19 hours per week. Using the midpoint method, the elasticity of Charles’s labor supply between the wages of $50 and $65 per hour is approximately , which means that Charles’s supply of labor over this wage range is .

Answer 1

Answer:

Elascticity of supply is 2.38, which means that it is highly elastic.

Explanation:

At a wage rate of $50 per hour, Charles is willing to work 10 hours per week.

At a wage rate of $65 per hour, he is willing to work 19 hours per week.

Here,

P1 = $50, P2 = $65, Q1 = 10 hours, Q2=19 hours

Change in labor supply

= $\frac{Q2\ -\ Q1}{\frac{Q1\ +\ Q2}{2} }$

= $\frac{19\ -\ 10}{\frac{10\ +\ 19}{2} }$

= $\frac{9}{14.5}$

= 0.62

Change in labor price

=  $\frac{P2\ -\ P1}{\frac{P1\ +\ P2}{2} }$

= $\frac{65\ -\ 50}{\frac{50\ +\ 65}{2} }$

= $\frac{15}{57.5}$

= 0.26

Elasticity of supply

=$\frac{Change in labor supply}{Change in labor price}$

=$\frac{0.62}{0.26}$

=2.38

Elascticity of supply is 2.38, which means that it is highly elastic.