Assiognment:
Price Elasticity of Supply
How do we define price elasticity of supply?
The Price Elasticity Coefficient and Formula
How do we measure price elasticity of supply? What is in the numerator of elasticity equation? What is in the denominator?
In elasticity calculations, we use the midpoint formula to determine percentage changes.
According to midpoint formula, how do we measure percentage change in quantity supplied? How do we measure percentage change in price?
Interpretation of Es
If price elasticity of supply for a commodity is _____ 1, supply is elastic. What does elastic supply indicate in terms of how responsive producers are to price changes?
If price elasticity of supply for a commodity is _____ 1, supply is unit-elastic.
If price elasticity of supply for a commodity is _____ 1, supply is inelastic. What does inelastic supply indicate in terms of how responsive producers are to price changes?
Numerical Example
Following textbook, suppose that an increase in the price of a commodity from $4 to $6 raises quantity supplied from 10 to 14 units. What is price elasticity of supply for this section of supply curve? Is supply elastic, unit-elastic, or inelastic?
Next, suppose that price of the commodity rises further from $6 to $8, which raises quantity supplied from 14 to 18 units. What is price elasticity of supply for this second section of supply curve? Is supply elastic, unit-elastic, or inelastic?
Finally, suppose that an additional increase in price of the commodity from $8 to $10 raises quantity supplied from 18 to 22 units. What is price elasticity of supply for this third section of supply curve? Is supply elastic, unit-elastic, or inelastic?
Based on your calculations, is price elasticity of supply on a given supply curve (Lecture 6) more or less volatile than price elasticity of demand on a given demand curve (Lecture 5)?
Attachment:- Lecture assignment.rar