patworsley
02.03.2021 •
Business
Consider two markets: the market for cat food and the market for dog food. The initial equilibrium for both markets is the same, the equilibrium price is $1.50 , and the equilibrium quantity is 21.0 . When the price is $8.75 , the quantity supplied of cat food is 57.0 and the quantity supplied of dog food is 107.0 . For simplicity of analysis, the demand for both goods is the same. Using the midpoint formula, calculate the elasticity of supply for dog food. Please round to two decimal places.
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Ответ:
Elasticity of supply for dog food = 0.95
Explanation:
From the question, we have:
New quantity supplied of dog food = 107.0
Old quantity supplied of dog food = Initial equilibrium quantity = 21.0
New price = $8.75
Old price = Initial equilibrium price = $1.50
Generally, the formula for calculating the elasticity of supply is as
follows:
Elasticity of supply = Percentage change in quantity supplied / Percentage change in price (1)
Where, based on the midpoint formula, we have:
Percentage change in quantity supplied of dog food = {(New quantity supplied of dog food - Old quantity supplied of dog food) / [(New quantity supplied of dog food + Old quantity supplied of dog food) / 2]} * 100 = {(107.0 - 21.0) / [(107.0 + 21.0) / 2]} * 100 = 134.375%
Percentage change in price = {(New price - Old price) / [(New price + Old price) / 2]} * 100 = {(8.75 - 1.50) / [(8.75 + 1.50) / 2]} * 100 = 141.463414634146%
Substituting the values into equation (1), we have:
Elasticity of supply for dog food = 134.375% / 141.463414634146% = 0.94989224137931
Approximated to 2 decimal places, we have:
Elasticity of supply for dog food = 0.95
Ответ:
B.)
Explanation: