Sapling Learning macmilan learning Ma Consider two markets T

Sapling Learning macmilan learning Ma Consider two markets. The initial equilibrium for both markets is the same, P-$3.50, and Q = 29.0. When the price is $10.75, the quantity supplied of coffee is 53.0 and the quantity supplied of hot cocoa is 109.00. The demand for both goods is the same (for simplicity of analysis). Use this information to answer the questions below: Using the midpoint formula, calculate the elasticity of supply for hot cocoa? Please round to two decimal places Number Supply in the market for coffee is: O O O less elastic than supply in the market for hot cocoa. more elastic than supply in the market for hot cocoa. There is not enough information to tell which will has a highen elasticity. the same elasticity as supply in the market for hot cocoa. Check Answer -I Ed Next Previous Give Up & View Solution

Solution

The midpoint formula is calculated first for the percentage change in price and then for the percentage change in quantity.

Percentage change in price = (New price – Old price) / (average price)

                                                      = (10.75 – 3.50) / ((10.75 + 3.50) / 2) = 101.75%

Percentage change in quantity = (New quantity – Old quantity) / (average quantity)

                                                                = (109 – 29) / ((109 + 29) / 2) = 115.94%

Elasticity of supply for hot cocoa = 101.75 / 115.94 = 0.88

The change in price for both the products is the same however, the change in the quantity supplied for coffee is less than the change in the quantity supplied for hot cocoa. Hence it can be said that the supply in the market for coffee is less elastic than supply in the market for hot cocoa.