Consider two markets: the market for coffee and the market for hot cocoa. The initial equilibrium for both markets is the same, the equilibrium price is $4.50, and the equilibrium quantity is 35.0. When the price is $11.75, the quantity supplied of coffee is 59.0 and the quantity supplied of hot cocoa is 103.0. For simplicity of analysis, the demand for both goods is the same. Using the midpoint formula, calculate the elasticity of supply for hot cocoa.
Consider two markets: the market for coffee and the market for hot cocoa. The initial equilibrium for both markets is the same, the equilibrium price is $4.50, and the equilibrium quantity is 35.0. When the price is $11.75, the quantity supplied of coffee is 59.0 and the quantity supplied of hot cocoa is 103.0. For simplicity of analysis, the demand for both goods is the same. Using the midpoint formula, calculate the elasticity of supply for hot cocoa.
Chapter20: Elasticity: Demand And Supply
Section: Chapter Questions
Problem 13E: Using the following equation for the demand for a good or service, calculate the price elasticity of...
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Consider two markets: the market for coffee and the market for hot cocoa. The initial equilibrium for both markets is the same, the
Using the midpoint formula, calculate the elasticity of supply for hot cocoa.
Expert Solution
Step 1
Through the midpoint, we can calculate the elasticity of supply.
The formula for the elasticity of supply:
Es = {(Q2-Q1)/[(Q2+Q2)/2]} / {(P2-P1)/[(P2+P2)/2]}
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