Currently, at a price of $0.5 each, 200 popsicles are sold per day in the perpet

Question

Currently, at a price of $0.5 each, 200 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 $0.5 to $1 is unit-elastic (Es = 1). In the long run, a price increase from $0.5 to $1 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 $1 each?

  _________   per day

How many popsicles will be sold/supplied per day in the long run if the price rises to $1 each?

__________   per day

Explanation / Answer

Es = (% change in quantity)/(%change in price) = (change in quantity * price)/(change in price * quantity)

change in price = 0.5, price = 0.5, quantity = 200

if Es = 1

1 = (change in quant * 0.5)/(0.5 * 200)

=> change in quant = 100 =>300 popsicles will be sold

if Es = 1.5

1.5 = (change in quant * 0.5)/(0.5 * 200)

=> change in quant = 150 =>450 popsicles will be sold

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.