Problema Solution
Suppose the price of apples goes up from $23 to $25 a box. In direct response, Goldsboro Farms supplies 1500 boxes of apples instead of 1400 boxes. Compute the coefficient of price elasticity (midpoints approach) for Goldsboro’s supply.
Instructions: Round your answer to two decimal places.
Es =
Answer provided by our tutors
Price elasticity of supply
= [(Q2 - Q1) / {(Q2 + Q1)/2}] / [(P2 - P1) / {(P2 + P1)/2}]
= [(1500 - 1400)/ {(1500+1400)/2}] / [(25 - 23)/{(23 + 25)/2}]
= (100 / 1450) / (2 / 24)
= 0.83