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20 February, 05:37

Assume a steel company is willing to sell its alloy beams for $400 a piece and produce 100000 units. At a price of 449 they are willing to sell 100,935 units. From this information, calculate the price elasticity of supply.

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  1. 20 February, 08:58
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    The price elasticity of supply is 0.0763 or 7.63%.

    Explanation:

    Price Elasticity of Supply shows response of quantity supplies to the price of the product supplied. Its Formula is as follow:

    Price Elasticity of Supply = % change in supply / % change in price

    Price Elasticity of Supply = (0.935% / 12.25%) x 100 = 7.63%

    % Change in Supply = (100,935 - 100,000) / 100,000 = 0.935%

    % Change in Price = (449 - 400) / 400 = 12.25%
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