You only need to calculate the elasticity in terms of the Midpoint Method OR Per

Question

You only need to calculate the elasticity in terms of the Midpoint Method OR Percentage Change Method You do NOT need to calculate both ways Although on the exams you will need to show your work, it is not necessary to show all the calculations for the quizzes On a certain supply curve, one point (initial point) is quantity supplied. Q1 = 200. price. P1 = $5 00 and another point is quantity supplied = 220. price = $9 00 Using the quantities and prices calculate the price elasticity of supply using the Midpoint Method OR Percentage Change

Explanation / Answer

Midpoint method:

P1 = $5       Q1= 200

P2 = $9       Q2 = 220

Elasticity of supply = (220 - 200) / (9 - 5) * (5 + 9) / (200 + 220)

                            = (20 / 4) * (14 / 420) = 0.167

Percentage Method:

Elasticity of supply = % change in QS / % change in price

                            = 10% / 80% = 0.125

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