Question

g Consider two markets: the market for motorcycles and the market for pancakes. The initial equilibrium for both markets is the same, the equilibrium price is $ 5.50 , and the equilibrium quantity is 37.0 . When the price is $ 8.75 , the quantity supplied of motorcycles is 69.0 and the quantity supplied of pancakes is 105.0 . For simplicity of analysis, the demand for both goods is the same. Using the midpoint formula, calculate the elasticity of supply for pancakes. Please round to two decimal places.

Answer 1

Given,

The equilibrium price is $5.50 (P)

The equilibrium quantity is 37.0 (Q)

The price is $ 8.75

(percentage change in quantity)/(percentage change in price)

So Motorcycles would be the following:

[(63 - 29)/29]/[($12.75 - $0.50)/$0.50]

=62 / 11.75

= 5.27

Evaluate, then do the same for pancakes.