Using the Midpoint Formula of Price Elasticity of Supply

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 (Es=1.0). So how many popsicles will be sold each day in the short run if the price rises to $2 each? In the long run, if the price rises to $2 each? (Hint: Apply the midpoint approach to the elasticity of supply).

Solution Preview

The midpoint formula for elasticity of supply is:

Es = ((P1+P2)/(Q1+Q2))*((Q2-Q1)/(P2-P1)

In the short run:

1 = ...

Solution Summary

This solution gives detailed calculations showing how to apply the midpoint formula of price elasticity of supply to predit the number of popsicles sold in the perpetually hot town of Rostin.

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