Question

when the price of cell phones decreased from $16 to $12, production decreased from 2,800 to 1,500 per month. i can conclude that the supply of cell phones is price dropdown with options: elastic, inelastic, indeterminate

Explanation:

To determine price elasticity of supply, we use the formula for price elasticity of supply (\(E_s\)): \(E_s=\frac{\%\text{ change in quantity supplied}}{\%\text{ change in price}}\).

First, calculate the percentage change in quantity supplied: \(\%\Delta Q=\frac{Q_2 - Q_1}{(Q_2 + Q_1)/2}\times100=\frac{1500 - 2800}{(1500 + 2800)/2}\times100=\frac{- 1300}{2150}\times100\approx - 60.47\%\).

Next, calculate the percentage change in price: \(\%\Delta P=\frac{P_2 - P_1}{(P_2 + P_1)/2}\times100=\frac{12 - 16}{(12 + 16)/2}\times100=\frac{-4}{14}\times100\approx - 28.57\%\).

Now, find \(E_s\): \(E_s=\frac{\vert - 60.47\%\vert}{\vert - 28.57\%\vert}\approx2.12\). Since \(E_s> 1\), the supply is price elastic.

Answer:

elastic