Question

suppose that the quantity supplied of beef decreased by 24% as a result of an 16% decrease in the price of beef. 1. from this information we can conclude that the implied price elasticity of supply is equal to 1.5. 2. this means that the supply of beef is elastic. 3. let’s denote the absolute value of the elasticity you found as x. then we normally interpret the elasticity as follows: for every select decrease in price, 4. 24% 1% x% 16% decrease by select

Explanation:

Step1: Recall price - elasticity of supply formula

The formula for price - elasticity of supply ($E_s$) is $E_s=\frac{\%\text{ change in quantity supplied}}{\%\text{ change in price}}$.

Step2: Substitute given values

Given that the $\%\text{ change in quantity supplied}=- 24\%$ and the $\%\text{ change in price}=-16\%$. Then $E_s=\frac{-24\%}{-16\%}=1.5$.

Step3: Determine elasticity type

If $E_s > 1$, supply is elastic. Since $E_s = 1.5>1$, the supply of beef is elastic.

Step4: Interpret elasticity

The price - elasticity of supply of 1.5 means that for every 1% decrease in price, the quantity supplied decreases by 1.5%.

Answer:

1. 1.5
2. elastic
3. 1%
4. 1.5%