Currently, at a price of $2 each, 300 popsicles are sold per day in the perpetua

Question

Currently, at a price of $2 each, 300 popsicles are sold per day in the perpetually hot town of Rostin. Consider the elasticity of supply. In the short run, a price increase from $2 to $4 is unit-elastic (Es = 1). In the long run, a price increase from $2 to $4 has an elasticity of supply of 1.5. (Hint: Apply the midpoints approach to the elasticity of supply.)

How many popsicles will be sold/supplied each day in the short run if the price rises to $4 each?

How many popsicles will be sold/supplied per day in the long run if the price rises to $4 each?

Explanation / Answer

Unit elastic means that the increase in price results in a increase in supply at the same percentage. For example, if I increased the price by 20%, I will get a 20% increase in supply.

So an increase from 2-4 means that you had a 100% increase in price, meaning that you'll have 600 popsicles supplied in the short run.

This can be found by transposing the midpoint formula to be %?Q/%?P.
%?Q/%?P = 1
%?Q/100 = 1
%?Q = 100
? 600 popsicles supplied
In your second answer, you apply the same method
%?Q/100 = 1.5
%?Q = 150
150% increase of 300 is 750
? 750 popsicles supplied.

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