no. 14 PART 2 I Microeconomics Fundamentals What is the price elasticity of supp
ID: 1143335 • Letter: N
Question
no. 14
PART 2 I Microeconomics Fundamentals What is the price elasticity of supply between a. P-: $10 and P-$82 b. P $8 and P = $6? 12. How might you determine whether Nike and Reebok are in competition with each other? 13. Assume the cross-elasticity of demand for car tires with respect to the price of cars is -2. What does this tell you about the relationship between car tires and cars when the price of cars rises by 10 percent? d, P = $4 and P = $2? e. P $2 and P-$0? 15. Why would consumers prefer that the govern. 14. Consider the following supply schedule: ment tax products with elastic, rather than inelastic demand? Quantity Elasticity supplied coefficient 16. Opponents of increasing the tax on gasoline argue Price that the big oil companies just pass the tax along to the consumers. Do you agree or disagree? Explain your answer. $10 50 40 30 20 10Explanation / Answer
Supply Elasticity between
a. P = 10 and P = 8
Price
Quantity Supplied
Elasticity Coefficient
$10
50
8
40
01
Using the midpoint formula
Es = Q/P * P1+P2/Q1+Q2
Es = 10/2 * 18/90 = 1
b. P = 8 and P = 6
Price
Quantity Supplied
Elasticity Coefficient
$8
40
6
30
01
Using the midpoint formula
Es = Q/P * P1+P2/Q1+Q2
Es = 10/2 * 14/70 = 1
c. P = 6 and P = 4
Price
Quantity Supplied
Elasticity Coefficient
$6
30
4
20
01
Using the midpoint formula
Es = Q/P * P1+P2/Q1+Q2
Es = 10/2 * 10/50 = 1
d. P = 4 and P = 2
Price
Quantity Supplied
Elasticity Coefficient
$4
20
2
10
01
Using the midpoint formula
Es = Q/P * P1+P2/Q1+Q2
Es = 10/2 * 6/30 = 1
e. P = 2 and P = 0
Price
Quantity Supplied
Elasticity Coefficient
$2
10
0
0
01
Using the midpoint formula
Es = Q/P * P1+P2/Q1+Q2
Es = 10/2 * 2/10 = 1
(Note – Even if you use the proportionate method to calculate the supply elasticity the coefficient of elasticity will be one.)
Price
Quantity Supplied
Elasticity Coefficient
$10
50
8
40
01
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