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Suppose the price of university sweatshirts increases from $10 to $20 and the quantity supplied increases from 20 to 30. The price elasticity of supply, using the midpoint formula, is:______.A) 0.66. B) 1.50. C) 0.60. D) 1.66.

Respuesta :

jepessoa

Answer:

C) 0.60

Explanation:

price elasticity of supply using the midpoint formula = {(S2 - S1) /[(S2 + S1)/2]} / {(P2 - P1) /[(P2 + P1)/2]}

= {(30 - 20) /[(30 + 20)/2]} / {(20 - 10) /[(20 + 10)/2]} = (10 / 25) / (10 /15) = 0.4 / 0.67 = 0.6

This means that the supply is price inelastic since a large increase in price will cause a smaller increase in the quantity supplied.

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