Price Elasticity Calculations

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2020

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Economics

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Jan 9, 2024

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Baez 1 Isaac Baez Professor Herlihy ECN-2020 12/04/23 Elasticity Calculation Paper 1. The data at hand seems to demonstrate the supply of strawberries throughout the years. The reason being that the quantity supplied rises as price increases because consumers are willing to pay for the good at higher prices. This encourages producers to supply more at higher prices. 2. I personally believed that strawberries were going to be an elastic good because they aren’t a necessity. While fruit is important to a healthy diet, there are alternatives and substitute goods that can fulfill the same dietary need such as canned fruit. Therefore, I thought consumers would not buy strawberries at a higher price. 3. Using the midpoint approach to determine elasticity we do:  (141.07 -130.99) / [(141.07+130.99) / 2] / (2.88-1.99) / [(2.88+1.99) /2]  To simplify Quantity terms (141.07-130.99 = 10.08) (141.07+130.99 = 272.06)  To simplify Price terms (2.88-1.99 = 0.89) (2.88+1.99 = 4.87)  This would bring our equation down to (10.08) / [(272.06) / 2] / (0.89) / [(4.87) / 2]  We then simplify it further by doing (272.06) / 2 = 136.03 and (4.87) / 2 = 2.44  This will bring our equation down to (10,08) / [136.03] / (0.89) / [2.44]  We split up the division: 10.08 / 136.03 = 0.07 and 0.89 / 2.44 = 0.36  Our final equation is 0.07 / 0.36 which equals 0.19.

B 2  The value of elasticity is 0.19 meaning that strawberries are an inelastic good. 4. The elasticity of strawberries was determined to be inelastic. As the price and quantity of strawberries supplied increased, consumers continued to purchase the item at a higher price. This caused the good to become inelastic and proves my initial assumption to be incorrect. 5. Some possibilities that could have caused this include consumers still purchasing strawberries after the price increases, along with producers supplying more strawberries at higher prices. 6. Based on my findings about strawberries inelastic behavior, I believe a 10% increase in price will cause an increase in quantity supplied. It is clear that a small increase from $1.99 to $2.88 causes an increase in supply, which means producers should supply more strawberries proportionate to the price increase. References Equation used to determine elasticity: (Q2-Q1) / [(Q2+Q1)/2] / (P2-P1) / [(P2+P1)/2]

B 3 All values are rounded to the nearest hundredth in calculations (two spots after the decimal point) Graph used for calculations: DATE Price Quantity 1/1/122.878083333 141.07 1/1/132.665090909 141.83 1/1/142.494545455 139.9 1/1/15 2.462 130.79 1/1/16 2.43525 118.26 1/1/17 2.34375 135.68 1/1/18 2.33925 134.23 1/1/19 2.28875 119.72 1/1/202.215727273 128.17 1/1/212.023636364 133.42 1/1/22 1.9925 130.99

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