Quiz 2: Microeconomics

Student name: Nguyen Duc Thang

Class: K06HN
Date: 13/02/2022
Time: 30 minutes

The supply schedule for personal computers in Vietnam as below:

1. Calculate the price elasticity of supply when the price increases from $900 to $1,100 using the
midpoint method.

2. Suppose rms produce 1,000 more computers at any given price due to improved technology. As
price increases from $900 to $1,100, is the price elasticity of supply now greater than, less than,
or the same as it was in part a? the new equilibrium price and quantity on your diagram.

3. Suppose a longer time period under consideration means that the quantity supplied at any given
price is 20% higher than the gures given in the table. As price increases from $900 to $1,100, is
the price elasticity of supply now greater than, less than, or the same as it was in part a?

Answers:

1. Calculate the price elasticity of supply when the price increases from $900 to $1,100 using
the midpoint method.

Price elasticity of supply when price increases from $900 to $1100 using midpoint method.

Percent change in quantity = (Q2 – Q1) / ((Q1 + Q2) ÷ 2) * 100

= (12000 - 8000) / ((12000 + 8000) ÷ 2) * 100
= (4000 / 10000) * 100
= 40%

Percentage change in price = (P2 – P1) / ((P2 + P1) ÷ 2) * 100

= (1100 - 900) / ((1100 + 900) ÷ 2) * 100
= 20%

Therefore, price elasticity of supply is 40% / 20% = 2

2. Suppose rms produce 1,000 more computers at any given price due to improved
technology. As price increases from $900 to $1,100, is the price elasticity of supply now
greater than, less than, or the same as it was in part a? the new equilibrium price and
quantity on your diagram.

The elasticity estimate would be lower. A price change from $900 to $1,100 is a 20% price
change, just as in part 1. When the quantity supplied change from 8,000 to 12,000, that was 40%
change in the quantity supplied. Now that the quantity supplied at each price is higher by 1,000,
the same price change would imply a change in the quantity supplied from 9,000 to 13,000,

= (13000 – 9000) / ((13000 + 9000) ÷ 2) * 1000

= 4000 / 11000 * 100
= 36%

36% change using the midpoint method. The new price elasticity of supply is 36% / 20% = 1.8,
which is lower than in part 1
3. Suppose a longer time period under consideration means that the quantity supplied at any
given price is 20% higher than the gures given in the table. As price increases from $900
to $1,100, is the price elasticity of supply now greater than, less than, or the same as it
was in part a?

The elasticity estimate would be unchanged. The price increase from $900 to $1,100 is a 20%
increase, just as calculated in part 1. But now that all quantities are 20% higher, the quantity
supplied has increased from
20% increase of 12000 = 24000 it will be 12000 + 2400 = 14400
20% increase of 8000 = 1600 thus 8000 + 1600 = 9600

Using the midpoint method, this is an increase of

= (14400 – 9600) / ((14400 + 9600) ÷ 2) * 1000
= 4800 / 12000
= 40%

So that the price elasticity of supply is 40% / 20% = 2

Therefore, the price elasticity of supply is the same as in part 1.

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