Question

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7. Calculating the price elasticity of supply Gilberto is a retired teacher who lives in Houston and teaches tennis lessons for extra cash. At a wage of $25 per hour, he is willing to teach 6 hours per week. At $35 per hour, he is willing to teach 16 hours per week. Using the midpoint method, the elasticity of Gilberto's labor supply between the wages of $25 and $35 per hour is approximately 2.73,which means that Gilberto's supply of labor over this wage range is elasticY .

answer options are:

0.03

0.37

2.73

11

Elastic or Inelastic?

Answer 1

Answer 7

Formula :

Elasticity using Mid Point method is given by:

e = ((Q₂ - Q₁)/(Q₁ + Q₂)) / ((P₂ - P₁)/(P₁ + P₂))

Here Q₁ = 6, Q₂ = 16, P₂ = 25, P₁ = 35

Hence e = ((16 - 6)/(6 + 16)) / ((35 - 25)/(25 + 35))

=> e = 2.73

As elasticity > 1 implies that this elasticity of supply is elastic.

Hence the correct answers are Option (c) 2.73 and elastic.