A Explain why the effect of quantity supplied rises by 19 if

A) Explain why the effect of quantity supplied rises by 19% if the price of an ice cream cones rises from $2.05 to $2.35. The price Elasticity of supply for ice cream is 1.35.

B) Explain why E= -0.66, the good is inferior, demand is inelastic. If the Incoome changes from $18 000 to $20 000. and the quantity demanded changes from 445 to 415

Solution

1> The price elasticity of supply = % change in quantity supplied / % change in price

So, change in price is 0.3/(2.05+2.35)x0.5=0.13793103448

Thus, we have 19%/13.793103448% which is approximately equal to 1.35

2> change in income is 2000/18000=0.11111111111

Change in quantity = 30/445=0.06741573033

So, after diving them, we get an elasticity close to -0.66