Answered: Currently, at a price of $1 each, 100…

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

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Currently, at a price of $1 each, 100 popsicles are sold per day in the perpetually hot town of Rostin. Consider the elasticity of supply. In the short run, a price increase from $1 to $2 is unit-elastic (E_s = 1). In the long run, a price increase from $1 to $2 has an elasticity of supply of 1.50. (Hint: Apply the midpoints approach to the elasticity of supply.)

A. How many popsicles will be sold each day in the short run if the price rises to $2 each?

B. So how many popsicles will be sold per day in the long run if the price rises to $2 each?

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