The graph below shows the supply of iced coffee Supply of Iced Coffee 0.11 polnt

Question

The graph below shows the supply of iced coffee Supply of Iced Coffee 0.11 polnts 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 Print 0.5 50 100 150 200 250 300 350 400 450 500 Quantity of Iced Coffee Instructions: Round your answers to two decimal places a. Using the starting point method, what is the price elasticity of supply from a price of $4.00 to a price of $4.50 per iced coffee? and supply is said to be price Cick to select) b. Using the starting point method, what is the price elasticity of supply from a price of $1.00 to a price of $1.50 per iced coffee? and supply is said to be price Click to select) V

Explanation / Answer

a. The supply at price $ 4 is 350 and price $4.5 is 400

Price elasticty odf supply has aformula : % change in Quantity supplied / % change in price

Hence calculating it we get :

For % change in price = (Final price- Initial price/Initial price ) *100

(4.5-4/4)*100= 12.5

For % change in Quantity supplied = (Final supply - Initial supply /Initial supply) *100

(400-350/350)*100= 14.28 )

Hence Elasticity of supply = 14.28/12.5 = 1.14 (Elastic supply )

b. Similarly for price change from $1 to $ 1.5 has Supply change from 50 units to 100 units

Hence % change in price = 50

and % change in supply = 100

Hence Supply elasticty = 100/50 = 2 (Elastic supply)

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