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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). In the long run, a price increase from $1 to $2 has an elasticity of supply of 1.50. (Hint: Apply the midpoints approach to the elasticity of supply.)
a. So how many popsicles will be sold per day in the long run if the price rises to $2 each?

Respuesta :

Answer:

a. 300 Popsicle will be sold per day in the long run.

Explanation:

When the price of goods changes the demand and supply also changes. The elasticity of supply is % change in quantity supplied / % change in price.

The price elasticity in the long run will be more and lesser in the short run. If the price of Popsicle increases from $1 to $2 in the long run and the price elasticity is 1.5 in the long run then the  quantity of Popsicle sold will be 300 per day. This is calculated as

= Price elasticity in long run * increased price in the long run * quantity sold per day.

= 1.5 * $2 * 100 Popsicle

= 300 Popsicle's.