Consider two markets. The initial equilibrium for both markets is the same, P =
ID: 1202696 • Letter: C
Question
Consider two markets. The initial equilibrium for both markets is the same, P = $6.50, and Q = 25.0. When the price is $8.75, the quantity supplied of motorcycles is 61.0 and the quantity supplied of pancakes is 103.00. The demand for both goods is the same (for simplicity of analysis). Use this information to answer the questions below: Using the midpoint formula, calculate the elasticity of supply for pancakes? Please round to two decimal places. Supply in the market for motorcycles is: less elastic than supply in the market for pancakes. more elastic than supply in the market for pancakes. there is not enough information to tell which will has a higher elasticity. the same elasticity as supply in the market for pancakes.Explanation / Answer
Initial price of pancakes= 6.50
Initial quantity supplied of pancakes=25
new price is 8.75 and quanitity supplied = 103
Using the midpoint formula,
percentage change in price =new price -old price / (new price+old price/2)
= 8.75-6.50/(8.75+6.50/2)
= 2.25/7.625= 29.50%
Percentage change in quantity=new quantity -old quantity / (new quantity+old quantity/2)
= 103-25/(103+25/2)
=78/64=121.8%
Elasticity of supply is perecntage change in quantity supplied / percentage change in price
= 121.8%/29.5%=4.12
B.old price of motorcycle is 6.50 and quantity is 25
new price of motorcycle is 8.75 and quantity is 61
Using midpint formula
percentage change in price=8.75-6.50/(8.75+6.50/2)=29.50
percentage change in quantity supplied=61-25/(61+25/2)=36/48.5=74%
Elasticity supply for motorcycle is = 74/29.50=2.5
the elasticity of supply form motorcycle is less elastic than pancakes.
(note - please forgive if there aresome calculation mistakes)