Answered

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Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is

Sagot :

The supply is elastic in nature.

Price elasticity expresses the percentage change in quantity required caused by a one percent increase in price while maintaining all other variables constant. If the elasticity is 2, a 1% increase in price results in a 2% decrease in amount demanded.

Price elasticity is computed with the help of formula given below:

Price elasticity of supply = % increase in quantity supplied / % increase in price

Price elasticity of supply = 20%/((.6-.5)/(.6+.5)/2)

Price elasticity of supply = 4.4

It is elastic in nature, because value of elasticity of supply is more than 1.

To know more about price elasticity click here:

https://brainly.com/question/5078326

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