Question

A shoe factory has an elasticity of supply of 0.5 as the price of shoes rises from $50 to $75. If the factory produced 100,000 shoes at a market price of $50, how many will be produced at $75?

Answer 1

Answer:

Explanation: As we know that ,

$Elasticity\:of\:supply\:=\:\frac{percenatge\:change\:in\:quantity\:supplied}{percenatge\:change\:in\:price}$

where,

$percenatge\:change\:in\:price\:=\frac{75-50}{50}$

= 50%

now, putting the value into equation we get,

$0.5\:=\:\frac{percenatge\:change\:in\:quantity\:supplied}{0.5}$

percentage change in quantity supplied = 0.25

therefore,

new quantity supplied = 100,000 (1+25%) = 125,000 units