At a Price of $4 Per Unit,Gadgets Inc

question 41

Multiple Choice

At a price of $4 per unit,Gadgets Inc.is willing to supply 20,000 gadgets,while United Gadgets is willing to supply 10,000 gadgets.If the price were to rise to $8 per unit,their respective quantities supplied would rise to 45,000 and 25,000.If these are the only two firms supplying gadgets,what is the elasticity of supply in the market for gadgets?

• A) 1.2
• B) 1.0
• C) 0.833
• D) 0.80
• The change in quantity supplied is (70,000 - 30,000)/(70,000 + 30,000)= 0.40 and the change in price is (8 - 4)/(8 + 4)= 0.333.Thus,elasticity is 0.40/.0333 = 1.2.

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Definitions:

Golf Courses

Facilities equipped with a series of holes, landscapes, and obstacles designed for the game of golf, where individuals can play rounds of golf.

Movie Theaters

Places where films are shown publicly for entertainment, typically featuring large screens and a ticket-based entry.

Normal Goods

Goods for which demand increases as the income of consumers increases, and falls when income decreases.

Income Elasticity of Demand

An indicator showing the responsiveness of the amount of a product that customers want to buy to variations in their income levels.