Determine whether supply is elastic, inelastic or unit elastic in these situatio

Question

Determine whether supply is elastic, inelastic or unit elastic in these situations.

a, when the local florist increases the price of roses by 20%, the quantity of roses supplied increases by 10%. b. when the price of gasoline decreases by 20%, the quantity of gasoline produced decreases by 4%. C. The quantity of eggs produced increases by 20% when the price of eggs increases by 8%. d, when the price of corn increased by 50%, 20% more corn was producec. e, when new refrigerator prices fell by 15%, the quantity of refrigerators produced decreased by 5%.

Explanation / Answer

ANSWER:

1) Price elasticity of supply = % change in quantity supplied / % change in price = 10% / 20% = 0.5

since pes < 1 , therefore the supply is inelastic.

2) Price elasticity of supply = % change in quantity supplied / % change in price = -4% / -20% = 0.2

since pes < 1 , therefore the supply is inelastic.

3) Price elasticity of supply = % change in quantity supplied / % change in price = 20% / 8% = 2.5

since pes > 1 , therefore the supply is elastic.

4) Price elasticity of supply = % change in quantity supplied / % change in price = 20% / 50% = 0.4

since pes < 1 , therefore the supply is inelastic.

5) Price elasticity of supply = % change in quantity supplied / % change in price = -5% / -15% = 0.33

since pes < 1 , therefore the supply is inelastic.

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