Answer:
PES = -0.5 or |0.5| in absolute terms, relatively inelastic supply
Explanation:
Price (Dollars) Demand (Millions) Supply (Millions)
$60 22 14
$80 20 16
$100 18 18
$120 16 20
Calculate the price elasticity of supply when the price is $80.
In order to calculate the PES at $80, we can use either the quantity when the price is $60 or $100.
P₀ = $80
P₁ = $60
Q₀ = 16
Q₁ = 14
or
P₀ = $80
P₁ = $100
Q₀ = 16
Q₁ = 18
the answer should be the same in this case:
PES = (-2/16) / ($20/$80) = -0.125 / 0.25 = -0.5 or |0.5| in absolute terms, relatively inelastic supply
