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Assume that the price of smart phones increased from $420 to $444 per unit. The manufacturer decides to supply 15,000 units instead of 12,000.
Calculate the price elasticity of supply.
Is supply elastic or inelastic?
Describe at least one factor that determines Price elasticity of supply (note, this is different than PE of Demand).
Hint: To answer this question we need to use the midpoint formula. Assume we have the two ordered pairs (Q1,P1) and (Q2,P2).
To extract the seller’s surplus, a buyer should design a bulk order offering the seller ________ up to the desired production.
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