Consider two markets: the market for cat food and the market for dog food. The initial equilibrium for both markets is the same, the equilibrium price is $5.50 , and the equilibrium quantity is 39.0 . When the price is $7.75 , the quantity supplied of cat food is 71.0 and the quantity supplied of dog food is 101.0 . For simplicity of analysis, the demand for both goods is the same. Using the midpoint formula, calculate the elasticity of supply for dog food. Please round to two decimal places. Supply in the market for cat food is

Accepted Solution

Answer:elasticity supply of dog food = 2.61elasticity supply of cat food = 1.71Step-by-step explanation:The midpoint formula for elasticity is:[tex]Elasticity = \frac{(Q2-Q1)/[(Q2+Q1)/2]}{(P2-P1)/[(P2+P1)/2]}[/tex]Point 1: Q = 39.0 and P = 5.50Point 2: Q = 101.0 and P = 7.75[tex]Elasticity\ supply\ of\ dog\ food = \frac{(101.0-39.0)/[101.0+39.0)/2]}{(7.75-5.50)/[(7.75+5.50)/2]}=2.61[/tex]Doing the same for the cat food:[tex]Elasticity\ supply\ of\ cat\ food = \frac{(71.0-39.0)/[71.0+39.0)/2]}{(7.75-5.50)/[(7.75+5.50)/2]}=1.71[/tex]