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Problem 1 Assume that the price of washing machines increased from $840 to $800 per unit. The manufacturer decides to supply 150,000 units instead of...

Problem 1

Assume that the price of washing machines increased from $840 to $800 per unit. The manufacturer decides to supply 150,000 units instead of 120,000. Calculate the price elasticity of supply. Is supply elastic or inelastic? Why? Describe at least one factor that determines elasticity.

Hint: To answer this question we need to use the midpoint formula. Assume we have the two ordered pairs (Q1,P1) and (Q2,P2).

Top Answer

=[(840+800/2),(15,000+12,000/2)] =[(1,640/2),(270,000/2)] MP=(820,... View the full answer

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Other Answers

Given that: P1 =800    &     Q1=12000                     P2=840      &     Q2=... View the full answer

2 comments
  • supply is inelastic since ( PES <1) =0.25
    • Minalaqueen
    • Jul 20, 2016 at 8:28am
  • spare production capacity:- the demand for the product is below what the business could potentially supply to the market. 13,500 < 15,000
    • Minalaqueen
    • Jul 20, 2016 at 8:30am

The way to answer this question is ... View the full answer

elasticity.docx

(800-840)
(800+840)/2
(120000-150000)
120000+150000/2
(-40/820)/(-30000/135000)
-40/820*-135000/30000
9/41

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