Price elasticity of supply, Microeconomics

Price elasticity of supply

– Computes the percentage change in quantity supplied resulting from a 1 percent variation in price.

– The elasticity is usually positive as price and quantity supplied are directly associated.

We can refer to elasticity of supply with regard to interest rates, wage rates, and the cost of raw materials.

1917_price elasticity of supply.png

  • Recall

2085_price elasticity of supply1.png

  • Elasticity of demand when price = $80 is

 Ep = 80/20 x -2/20 = -0.40

  • Elasticity of demand when price = $100 is

 Ep = 100/18 x -2/20 = -0.56

  • Elasticity of supply when price = $80 is

 Ep = 80/16 x 2/20 = 0.50

  • Elasticity of supply when price = $100 is

 Ep = 100/18 x 2/20 = 0.56

  • The Market for Wheat

– 1981 Supply Curve for Wheat

– QS = 1,800 + 240P

– 1981 Demand Curve for Wheat

– QD = 3,550 - 266P

– Equilibrium: Q S = Q D

 

1,800 + 240P = 3,550 - 266P

506P = 1,750

 P = 3.46/ bushel

 Q = 1,800 + (240)(3.46) = 2,630 million bushels

2045_price elasticity of supply2.png

– Suppose the price of wheat is $4.00/bushel

366_price elasticity of supply3.png

Posted Date: 7/24/2012 8:59:59 AM | Location : United States







Related Discussions:- Price elasticity of supply, Assignment Help, Ask Question on Price elasticity of supply, Get Answer, Expert's Help, Price elasticity of supply Discussions

Write discussion on Price elasticity of supply
Your posts are moderated
Related Questions
what is fixed and variable inputs with more explanation

If there is an industry and some of the companies get shut down, how would you graph the short run and long run effects

what the third degree price discrimination with case study of two successfull and unsuccessfull cases?

What was the price index for 2008, 2009 and 2010?

What mass (in grams) of O2 gas is present in a 36.0 L container at 673.0 K at 23.8 atm O2 pressure if the gas is ideal?

If coolest icecream parlor has been closing at 5pm with $120 of marginal revenue and $80 of marginal cost for the last hour open, what should coolest icecream do to maximize profit

(i). A firm's costs are 500 when output is 100. If the TC function is linear and fixed cost (FC) are 200, find the marginal cost when Q = 4, 5 and 6. (ii). The following are est


if marginal cost descreases then what else is effected by this

National income: The national income or product or expenditure provides a measure of total value at factor cost of final goods and services, which are available either fo