Suppose the supply equation is: Q = 14 + 1.70p. What is the price elasticity of...
Suppose the supply equation is: Q = 14 + 1.70p.
What is the price elasticity of supply if the market price is $3? 0.267
This means that if the price increases by 10%, the quantity supplied will (increase/decrease) by %
Homework Answers
Price elasticity of supply = (dQ\dp)*(p\q)
=1.70 x 3/(14+1.70P)
=1.70x3/(19.1)
= 0.267
Because it is less than one so the elasticity is said to be inelastic
This means that if the price increases by 10% then the quantity supplied will increase by:
0.267 = Percentage change in quantity/10%
=2.67%
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