Question

At a price of $150, a cell phone company manufactures 200,000 units. At a price of $250, the company manufactures 400,000 units. What is the price elasticity of supply

Answer 1

Based on the information given the price elasticity of supply is 1.33.

Price elasticity of supply

Price elasticity of supply=(400,000-200,000)÷(200,000+400,000/2)÷(250-150)/(150+250/2)

Price elasticity of supply=(200,000)÷(600,000/2)÷(100)/(400/2)

Price elasticity of supply=(200,000÷300,000)÷(100/200)

Price elasticity of supply=0.6666/0.5

Price elasticity of supply=1.33

Inconclusion the price elasticity of supply is 1.33.

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