Question

If the price of a haircut is $12, the number of haircuts provided is 100. If the price rises to $25 per haircut, barbers will work much longer hours, and the supply of haircuts will increase to 300. Instructions: Round your answer to two decimal places The price elasticity of supply for haircuts between $12 and $25 using the mid-point method is 1.42

Answer 1

P1 = $12

Q1 = 100

P2 = $25

Q2 = 300

Calculate the price elasticity of supply (Using the mid-point method) -

$Es = \frac{Q2-Q1}{\left ( Q2+Q1 \right )/2}\times \frac{\left ( P2+P1 \right )/2}{P2-P1}$

$Es = \frac{300-100}{\left (300+100 \right )/2}\times \frac{\left ( 25+12 \right )/2}{25-12}$

$Es = \frac{200}{200}\times \frac{18.5}{13}$

$Es = 1.42$

Thus,

The price elasticity of supply is 1.42