Question

Price (dollars per pizza) Quantity demanded (pizzas per day) 100 125 2) Using the data in the table above, when the price of a pizza falls from $10 to $9, what is the percentage change in price? (Use the midpoint method.) (20 Points) 3) Suppose the current price of barley is $7 per bushel and at that price 100,000 bushels are grown by a Colorado farmer. If the price of barley rises to $8 and quantity supplied increases to 130,000 bushels then using the midpoint method, calculate the price elasticity of supply for barley (20 Points) tart a web search

Answer 1

2.

Percentage change in price = [(P1 – P0) / {(P0 + P1) / 2}] × 100

Where,

P1 = 9

P0 = 10

Therefore,

Percentage change in price = [(P1 – P0) / {(P0 + P1) / 2}] × 100

                                                = [(9 – 10) / {(10 + 9) / 2}] × 100

                                                = [- 1 / (19/2)] × 100

                                                = [- 2 / 19] × 100

                                                = - 0.1053 × 100

                                                = - 10.53% (Answer)

Explanation: price decreased by 10.53%.

3.

Price elasticity of supply = [(Q1 – Q0) / {(Q0 + Q1) / 2}] / [(P1 – P0) / {(P0 + P1) / 2}]

Where,

P1 = 8

P0 = 7

Q1 = 130,000

Q0 = 100,000

Therefore,

Price elasticity of supply = [(130,000 – 100,000) / {(100,000 + 130,000) / 2}] / [(8 – 7) / {(7 + 8) / 2}]

                                          = [30,000 / (230,000 / 2)] / [1 / (15 / 2)]

                                          = [30,000 / 115,000] / [1 / 7.5]

                                          = (30,000 × 7.5) / 115,000]

                                          = 225,000 / 115,000

                                          = 1.96

Explanation: price elasticity of supply is elastic, since it is more than 1.