Question 5.9
1. Using the midpoint method, calculate the price elasticity of supply for web-design services when the price per hour rises from $100 to $150 and the number of hours transacted increases from 300,000 to 500,000. Is supply elastic, inelastic, or unit-elastic?
By the midpoint method, the percent change in the number of hours of web-design services contracted is
Similarly, the percent change in the price of web-design services is:
The price elasticity of supply is 50%/40% = 1.25. So supply is elastic.