AP Microeconomics Quiz: Price Elasticity Of Supply

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Price Elasticity Of SupplyQuestion 1 of 19

Using the supply data shown for a local bakery's cupcakes in the next week (the bakery has limited oven capacity and cannot add new ovens in that time), calculate the price elasticity of supply between Point A and Point B using the midpoint method.

Point A: $P = $10 per dozen, $Q_s = 40$ dozen Point B: $P = $12 per dozen, $Q_s = 48$ dozen

PES = 0.50

PES = 1.00

PES = 2.00

PES = 0.20

PES = -1.00

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AP Microeconomics Quiz

AP Microeconomics Quiz: Price Elasticity Of Supply

Practice Price Elasticity Of Supply in AP Microeconomics with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Price Elasticity Of Supply, giving you a quick way to practice the rules, question types, and explanations that matter most for AP Microeconomics.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

Point A: $P = $10 per dozen, $Q_s = 40$ dozen Point B: $P = $12 per dozen, $Q_s = 48$ dozen

$PES = 0.50$
$PES = 1.00$ (correct answer)
$PES = 2.00$
$PES = 0.20$
$PES = -1.00$

Explanation: The skill being tested here is calculating the price elasticity of supply (PES). PES measures how responsive the quantity supplied is to a change in price, calculated as the percentage change in quantity supplied divided by the percentage change in price, reflecting producers' ability to adjust output. In this case, we use the data from Point A (P=

10, Qs=40) and Point B (P=

12, Qs=48) for the bakery's cupcakes in the next week. Using the midpoint method, the PES is (8/44) / (2/11) = 1, indicating unit elastic supply where the percentage changes are equal. A common misconception is that a steeper supply curve always means inelastic supply, but elasticity considers relative changes, not just the slope. To calculate PES effectively, employ the midpoint formula for accuracy, compare %ΔQs to %ΔP, and factor in time horizons as short-run constraints like fixed oven capacity limit responsiveness. Remember, greater producer flexibility over longer periods typically increases elasticity.

Question 2

Using the supply data shown for a software firm selling licenses in the next day (digital delivery allows rapid scaling with minimal capacity constraints), is supply elastic, inelastic, or unit elastic over this price range? Use the midpoint method.

Point A: $P = $20 per license, $Q_s = 500$ licenses Point B: $P = $25 per license, $Q_s = 750$ licenses

Supply is inelastic over this range.
Supply is unit elastic over this range.
Supply is elastic over this range. (correct answer)
Supply is perfectly inelastic over this range.
Supply is perfectly elastic over this range.

Explanation: The skill being tested here is determining the price elasticity of supply (PES). PES measures how responsive the quantity supplied is to a change in price, calculated as the percentage change in quantity supplied divided by the percentage change in price, reflecting producers' scalability. In this case, we use the data from Point A (P=

20, Qs=500) and Point B (P=

25, Qs=750) for the software firm's licenses in the next day. Using the midpoint method, the PES is (250/625) / (5/22.5) = 1.8, which is greater than 1, classifying supply as elastic over this range. A common misconception is that digital goods always have perfectly elastic supply, but while highly responsive due to low marginal costs, it's not infinite. Use the midpoint formula for consistency, compare %ΔQs to %ΔP to determine elasticity category, and consider factors like digital delivery enabling quick scaling. This approach reveals why some supplies are highly elastic even in short time frames.

Question 3

Using the supply data shown for a small farm's strawberries in the next two days (the crop is already harvested, and packing capacity is fixed), is supply elastic, inelastic, or unit elastic over this price range? Use the midpoint method.

Point A: $P = $4 per box, $Q_s = 90$ boxes Point B: $P = $5 per box, $Q_s = 99$ boxes

Supply is perfectly inelastic over this range.
Supply is elastic over this range.
Supply is unit elastic over this range.
Supply is inelastic over this range. (correct answer)
Supply is perfectly elastic over this range.

Explanation: The skill being tested here is determining the price elasticity of supply (PES). PES measures how responsive the quantity supplied is to a change in price, calculated as the percentage change in quantity supplied divided by the percentage change in price, showing producers' adjustment capabilities. In this case, we use the data from Point A (P=

4, Qs=90) and Point B (P=

5, Qs=99) for the farm's strawberries in the next two days. Using the midpoint method, the PES is (9/94.5) / (1/4.5) ≈ 0.43, which is less than 1, classifying supply as inelastic over this range. A common misconception is ignoring the time horizon, but in the very short run with fixed harvested crops, supply is often inelastic regardless of price changes. To assess PES, always use the midpoint formula, compare %ΔQs to %ΔP to classify (elastic if >1, inelastic if <1, unit if =1), and consider production flexibility and time available for adjustments. This strategy helps predict how suppliers react in different market scenarios.

Question 4

Using the supply data shown for a local taxi company in the next hour (the number of licensed drivers currently logged in is fixed, but drivers can slightly extend their shifts), is supply elastic, inelastic, or unit elastic over this range? Use the midpoint method.

Point A: $P = $10 per ride, $Q_s = 200$ rides Point B: $P = $12 per ride, $Q_s = 220$ rides

Supply is elastic over this range.
Supply is unit elastic over this range.
Supply is perfectly elastic over this range.
Supply is inelastic over this range. (correct answer)
Supply is perfectly inelastic over this range.

Explanation: The skill being tested here is determining the price elasticity of supply (PES). PES measures how responsive the quantity supplied is to a change in price, calculated as the percentage change in quantity supplied divided by the percentage change in price, reflecting producers' immediate adjustments. In this case, we use the data from Point A (P=

10, Qs=200) and Point B (P=

12, Qs=220) for the taxi company in the next hour. Using the midpoint method, the PES is (20/210) / (2/11) ≈ 0.52, which is less than 1, classifying supply as inelastic over this range. A common misconception is assuming very short-run supply is perfectly inelastic, but slight adjustments like extending shifts can allow some responsiveness. Apply the midpoint formula accurately, compare %ΔQs to %ΔP for classification, and factor in time constraints limiting major changes. This technique explains supply behavior in time-sensitive markets.

Question 5

Using the supply data shown for a small bakery in the short run (its ovens are already at capacity, so output can only be increased slightly by adding overtime hours), calculate the price elasticity of supply (PES) between Point 1 and Point 2 using the midpoint method.

Supply data (per day):

Point 1: $P = $10, $Q_s = 40
Point 2: $P = $12, $Q_s = 44

$PES = 0.20$
$PES = 0.50$ (correct answer)
$PES = 2.00$
$PES = 0.10$
$PES = -0.50$

Explanation: The skill here is calculating the price elasticity of supply (PES). PES measures how responsive the quantity supplied is to a change in price, specifically the percentage change in quantity supplied divided by the percentage change in price, indicating producer responsiveness. We use the supply data from Point 1 (P=

10, Qs=40) and Point 2 (P=

12, Qs=44) for the bakery in the short run. Using the midpoint method, PES = [(44-40)/((44+40)/2)] / [(12-10)/((12+10)/2)] = (4/42) / (2/11) = 11/21 ≈ 0.52, which is approximately 0.50 due to rounding in options. A common misconception is that elasticity equals the slope of the supply curve, but PES is a unitless measure that considers relative changes, not just the absolute slope. To apply this broadly, always use the midpoint formula for accurate arc elasticity between two points. Additionally, compare %ΔQs to %ΔP and remember that supply elasticity increases over longer time horizons as producers gain flexibility to adjust output.

Question 6

Using the supply data shown for a wheat farm in the very short run (the crop is already planted and harvested quantity cannot be quickly changed), calculate the price elasticity of supply (PES) between Point 1 and Point 2 using the midpoint method.

Supply data (per week):

Point 1: $P = $8, $Q_s = 100
Point 2: $P = $10, $Q_s = 110

$PES = 0.40$ (correct answer)
$PES = 2.50$
$PES = 0.50$
$PES = 0.20$
$PES = 1.00$

8, Qs=100) and Point 2 (P=

10, Qs=110) for the wheat farm in the very short run. Using the midpoint method, PES = [(110-100)/((110+100)/2)] / [(10-8)/((10+8)/2)] = (10/105) / (2/9) = 3/7 ≈ 0.43, which is approximately 0.40 due to rounding in options. A common misconception is that supply is elastic even in the very short run, but time horizon matters—supply is often inelastic when output can't be quickly changed, like with planted crops. To apply this broadly, always use the midpoint formula for accurate arc elasticity between two points. Additionally, compare %ΔQs to %ΔP and consider producer flexibility and time available for adjustments.

Question 7

Using the supply data shown for a rideshare market in the long run (more drivers can enter and vehicles can be acquired), is supply elastic, inelastic, or unit elastic over the range from Point 1 to Point 2? Use the midpoint method.

Supply data (per hour in a city):

Point 1: $P = $20, $Q_s = 200
Point 2: $P = $30, $Q_s = 300

Inelastic, because $PES < 1$ over this range
Unit elastic, because $PES = 1$ over this range (correct answer)
Elastic, because $PES > 1$ over this range
Perfectly inelastic, because price changes do not affect entry
Perfectly elastic, because firms are price takers

Explanation: The skill here is determining the price elasticity of supply (PES). PES measures how responsive the quantity supplied is to a change in price, specifically the percentage change in quantity supplied divided by the percentage change in price, indicating producer responsiveness. We use the supply data from Point 1 (P=

20, Qs=200) and Point 2 (P=

30, Qs=300) for the rideshare market in the long run. Using the midpoint method, PES = [(300-200)/((300+200)/2)] / [(30-20)/((30+20)/2)] = (100/250) / (10/25) = 1, classifying supply as unit elastic over this range. A common misconception is that supply is inelastic in markets with many participants, but in the long run, entry and acquisition of resources make it more elastic or unit elastic. To apply this broadly, always use the midpoint formula for accurate arc elasticity between two points. Additionally, compare %ΔQs to %ΔP and consider producer flexibility and time available for adjustments.

Question 8

Using the supply data shown for a dairy cooperative in the short run (herd size cannot be increased quickly), calculate the price elasticity of supply (PES) between Point 1 and Point 2 using the midpoint method.

Supply data (per day):

Point 1: $P = $4, $Q_s = 200
Point 2: $P = $5, $Q_s = 220

$PES = 0.20$
$PES = 1.00$
$PES = 2.00$
$PES = 0.44$ (correct answer)
$PES = 0.50$

4, Qs=200) and Point 2 (P=

5, Qs=220) for the dairy cooperative in the short run. Using the midpoint method, PES = [(220-200)/((220+200)/2)] / [(5-4)/((5+4)/2)] = (20/210) / (1/4.5) = 3/7 ≈ 0.43, which is approximately 0.44 due to rounding in options. A common misconception is that supply for agricultural goods is always elastic, but in the short run with fixed herd size, it's often inelastic. To apply this broadly, always use the midpoint formula for accurate arc elasticity between two points. Additionally, compare %ΔQs to %ΔP and consider producer flexibility and time available for adjustments.

Question 9

Using the supply data shown for a concert venue in the short run (fixed seating capacity limits how many tickets can be supplied for an event), is supply elastic, inelastic, or unit elastic over the range from Point 1 to Point 2? Use the midpoint method.

Supply data (per event):

Point 1: $P = $40, $Q_s = 500
Point 2: $P = $50, $Q_s = 550

Elastic, because $PES > 1$ over this range
Inelastic, because $PES < 1$ over this range (correct answer)
Unit elastic, because $PES = 1$ over this range
Perfectly elastic, because quantity supplied changes when price changes
Perfectly inelastic, because capacity is fixed in the short run

40, Qs=500) and Point 2 (P=

50, Qs=550) for the concert venue in the short run. Using the midpoint method, PES ≈ 0.43, which is less than 1, classifying supply as inelastic over this range. A common misconception is that any change in quantity means elastic supply, but in the short run with fixed capacity like seating, supply is inelastic as producers can't easily increase output. To apply this broadly, always use the midpoint formula for accurate arc elasticity between two points. Additionally, compare %ΔQs to %ΔP and consider producer flexibility and time available for adjustments.

Question 10

Using the supply data shown for a wheat farm, calculate the price elasticity of supply (PES) between the two points using the midpoint method. Assume the time horizon is one growing season, so planted acreage is fixed but some additional effort and fertilizer can be applied.

Points: from $P =$ 5.00, Q_s = 1,000 $bushels to$ P = $6.00, Q_s = 1,100$ bushels.

PES = 0.10
PES = 0.52 (correct answer)
PES = 1.92
PES = 5.50
PES = -0.52

Explanation: This question requires calculating price elasticity of supply (PES) for agricultural production. PES measures how responsive farmers are to price changes, showing the percentage change in quantity supplied relative to the percentage change in price. From the data points (

5.00, 1,000 bushels) to (

6.00, 1,100 bushels): %ΔQs = (1,100-1,000)/1,050 × 100% = 9.52% and %ΔP = (6-5)/5.5 × 100% = 18.18%. Therefore, PES = 9.52%/18.18% = 0.52. A common error is assuming that agricultural supply must be perfectly inelastic—while planted acreage is fixed, farmers can still increase yield somewhat through additional effort and fertilizer. The one growing season time horizon with fixed acreage explains why supply is inelastic (PES < 1), as major output adjustments require planting decisions made months earlier. To master PES calculations, always use the midpoint formula for accuracy, recognize that even constrained producers have some flexibility, and understand how agricultural time lags and fixed inputs create relatively inelastic supply in the short run.

Question 11

A small farm has fixed land and limited irrigation capacity during the current growing season, so output cannot change much until next season. Using the supply data shown, is supply elastic, inelastic, or unit elastic between the two points (use the midpoint method conceptually)?

Point A: $P = $20 per box, $Q_s = 90$ boxes/week Point B: $P = $24 per box, $Q_s = 100$ boxes/week

Elastic, because quantity supplied changes by a larger percentage than price
Inelastic, because quantity supplied changes by a smaller percentage than price (correct answer)
Unit elastic, because quantity supplied changes by the same percentage as price
Perfectly elastic, because producers can expand output without limit in the short run
Perfectly inelastic, because quantity supplied does not change at all

Explanation: This question assesses your ability to classify price elasticity of supply (PES) as elastic, inelastic, or unit elastic. PES measures producer responsiveness by comparing the percentage change in quantity supplied to the percentage change in price. With Point A (P=

20, Qs=90) and Point B (P=

24, Qs=100), we calculate: %ΔQs = (100-90)/[(100+90)/2] × 100 = 10/95 × 100 = 10.53% and %ΔP = (24-20)/[(24+20)/2] × 100 = 4/22 × 100 = 18.18%. Since 10.53% < 18.18%, quantity changes by a smaller percentage than price, making supply inelastic (PES < 1). Don't confuse time horizons—the farm's fixed land and irrigation constraints in the current season create inelastic supply, though it might become more elastic next season. To classify supply elasticity correctly, calculate both percentage changes using the midpoint method, compare them directly, and consider production constraints that limit short-run flexibility.

Question 12

Using the supply data shown for a microbrewery in the short run (limited fermentation tank capacity restricts rapid expansion), is supply elastic, inelastic, or unit elastic over the range from Point 1 to Point 2? Use the midpoint method.

Supply data (per week):

Point 1: $P = $5, $Q_s = 1{,}000
Point 2: $P = $6, $Q_s = 1{,}050

Elastic, because $PES > 1$ over this range
Inelastic, because $PES < 1$ over this range (correct answer)
Unit elastic, because $PES = 1$ over this range
Perfectly elastic, because brewers can buy more inputs at the market price
Perfectly inelastic, because quantity supplied does not change when price changes

5, Qs=1,000) and Point 2 (P=

6, Qs=1,050) for the microbrewery in the short run. Using the midpoint method, PES ≈ 0.27, which is less than 1, classifying supply as inelastic over this range. A common misconception is that elasticity equals the slope of the supply curve, but PES is a unitless measure that considers relative changes, not just the absolute slope. To apply this broadly, always use the midpoint formula for accurate arc elasticity between two points. Additionally, compare %ΔQs to %ΔP and consider producer flexibility and time available for adjustments.

Question 13

Using the supply data shown for custom wedding cakes in the next week (bakers are fully booked and ingredient deliveries cannot be increased quickly), is supply elastic, inelastic, or unit elastic over this range? Use the midpoint method.

Point A: $P = $200 per cake, $Q_s = 50$ cakes Point B: $P = $240 per cake, $Q_s = 55$ cakes

Supply is elastic over this range.
Supply is unit elastic over this range.
Supply is inelastic over this range. (correct answer)
Supply is perfectly elastic over this range.
Supply is perfectly inelastic over this range.

Explanation: The skill being tested here is determining the price elasticity of supply (PES). PES measures how responsive the quantity supplied is to a change in price, calculated as the percentage change in quantity supplied divided by the percentage change in price, demonstrating producers' ability to respond. In this case, we use the data from Point A (P=

200, Qs=50) and Point B (P=

240, Qs=55) for custom wedding cakes in the next week. Using the midpoint method, the PES is (5/52.5) / (40/220) ≈ 0.52, which is less than 1, classifying supply as inelastic over this range. A common misconception is that higher prices always lead to proportionally higher supply, but in short time horizons with fixed bookings, responsiveness is limited. To evaluate PES, use the midpoint formula for precision, compare %ΔQs to %ΔP for elasticity type, and factor in time and resource constraints like ingredient availability. This strategy highlights why short-run supply is often inelastic.

Question 14

Using the supply data shown for a strawberry farm, determine whether supply is elastic, inelastic, or unit elastic over this range. Assume the time horizon is one week, so acreage cannot be changed and output can increase only slightly.

Points: from $P =$ 4.00, Q_s = 200 $to$ P = $6.00, Q_s = 240$ .

Elastic, because PES > 1 over the range
Inelastic, because PES < 1 over the range (correct answer)
Unit elastic, because PES = 1 over the range
Elastic, because the slope is positive over the range
Inelastic, because quantity rises by a larger number of units than price

Explanation: This question asks you to classify supply elasticity using price elasticity of supply (PES), which measures producer responsiveness to price changes. PES tells us whether quantity supplied changes proportionally more than price (elastic), less than price (inelastic), or exactly with price (unit elastic). From the data points (

4.00, 200 units) to (

6.00, 240 units), we calculate: %ΔQs = (240-200)/220 × 100% = 18.18% and %ΔP = (6-4)/5 × 100% = 40%. This gives PES = 18.18%/40% = 0.45, which is less than 1, indicating inelastic supply. A common error is thinking that because quantity rises by more units (40) than price rises in dollars (2), supply must be elastic—but elasticity compares percentage changes, not absolute changes. The one-week time horizon with fixed acreage severely limits the farm's ability to increase output, explaining the inelastic response. When classifying elasticity, remember that PES > 1 means elastic, PES < 1 means inelastic, and PES = 1 means unit elastic, and always consider how time constraints and fixed inputs affect producer flexibility.

Question 15

Using the supply data shown for a craft brewery's seasonal beer, determine whether supply is elastic, inelastic, or unit elastic over this range. Assume the time horizon is two days, and fermenter capacity is fixed.

Points: from $P =$ 8.00, Q_s = 400 $to$ P = $10.00, Q_s = 420$ .

Elastic, because PES > 1 over the range
Unit elastic, because PES = 1 over the range
Inelastic, because PES < 1 over the range (correct answer)
Elastic, because price increased by $25\%$
Inelastic, because the supply curve must be vertical in the long run

Explanation: This problem tests your understanding of classifying supply elasticity using price elasticity of supply (PES). PES measures how responsive producers are to price changes, with values less than 1 indicating inelastic supply where quantity adjusts less than proportionally to price. Using the data points (

8.00, 400 units) and (

10.00, 420 units): %ΔQs = (420-400)/410 × 100% = 4.88% and %ΔP = (10-8)/9 × 100% = 22.22%. Therefore, PES = 4.88%/22.22% = 0.22, which is clearly less than 1, confirming inelastic supply. A common mistake is thinking that a 25% price increase automatically means elastic supply—you must compare it to the quantity response, which here is only about 5%. The two-day time horizon with fixed fermenter capacity severely constrains the brewery's ability to increase output, explaining the highly inelastic response. To classify supply elasticity correctly, always calculate the actual PES value, compare it to the benchmark of 1, and consider how production constraints and time limitations affect the firm's ability to adjust output.

Question 16

A furniture maker can increase production substantially over a year by buying new tools and training workers; in the first week, output changes little. Consider the one-year adjustment period. Using the supply data shown, is supply elastic, inelastic, or unit elastic between the two points (use the midpoint method)?

Point A: $P = $200 per table, $Q_s = 50$ tables/month Point B: $P = $240 per table, $Q_s = 80$ tables/month

Elastic, because quantity supplied changes by a larger percentage than price (correct answer)
Inelastic, because quantity supplied changes by a smaller percentage than price
Unit elastic, because quantity supplied changes by the same percentage as price
Perfectly inelastic, because capacity constraints prevent any change in quantity
Perfectly elastic, because firms can supply any quantity at the new price

Explanation: This question examines price elasticity of supply (PES) over a longer time horizon when firms can adjust production capacity. PES measures the percentage change in quantity supplied relative to the percentage change in price, indicating producer flexibility. Using Point A (P=

200, Qs=50) and Point B (P=

240, Qs=80) with the midpoint method: %ΔQs = (80-50)/[(80+50)/2] × 100 = 30/65 × 100 = 46.15% and %ΔP = (240-200)/[(240+200)/2] × 100 = 40/220 × 100 = 18.18%. Therefore, PES = 46.15%/18.18% = 2.54, which is elastic since quantity changes by a larger percentage than price. A critical insight is that time horizon dramatically affects elasticity—supply is often inelastic in the short run but becomes elastic over longer periods as firms can expand capacity. To analyze supply elasticity correctly, always specify the time frame, use the midpoint method for accurate calculations, and remember that elastic supply (PES > 1) means producers can significantly increase output when prices rise.

Question 17

A mining company has limited extraction equipment in the short run, but it can expand capacity over several years by investing in new machinery. Consider the short-run situation described. Using the supply data shown, is supply elastic, inelastic, or unit elastic between the two points (use the midpoint method)?

Point A: $P = $40 per ton, $Q_s = 300$ tons/week Point B: $P = $50 per ton, $Q_s = 330$ tons/week

Elastic, because the slope of the supply curve is steep
Inelastic, because quantity supplied changes by a smaller percentage than price (correct answer)
Unit elastic, because price and quantity both increase
Elastic, because capacity constraints make firms highly responsive
Perfectly elastic, because mining output can expand immediately

Explanation: This question tests classification of price elasticity of supply (PES) when firms face short-run production constraints. PES measures how much quantity supplied changes in percentage terms relative to percentage price changes, revealing producer flexibility. Using Point A (P=

40, Qs=300) and Point B (P=

50, Qs=330) with the midpoint method: %ΔQs = (330-300)/[(330+300)/2] × 100 = 30/315 × 100 = 9.52% and %ΔP = (50-40)/[(50+40)/2] × 100 = 10/45 × 100 = 22.22%. Since 9.52% < 22.22%, quantity changes by a smaller percentage than price, making supply inelastic (PES = 0.43 < 1). Don't confuse slope with elasticity—a steep supply curve doesn't automatically mean elastic supply; you must compare percentage changes. To classify supply correctly, calculate PES using the midpoint method, remember that inelastic means PES < 1 (not zero), and recognize that short-run constraints typically create inelastic supply even if long-run supply is elastic.

Question 18

A concert venue has a fixed number of seats for an upcoming show, so the number of tickets available cannot change before the event. Using the supply data shown, calculate the price elasticity of supply (PES) between Point A and Point B using the midpoint method.

Point A: $P = $50 per ticket, $Q_s = 1{,}000$ tickets Point B: $P = $60 per ticket, $Q_s = 1{,}000$ tickets

$0$ (correct answer)
$0.20$
$1.00$
$5.00$
Undefined (cannot be computed because price changed)

Explanation: This question illustrates perfectly inelastic supply, where price elasticity of supply (PES) equals zero. PES measures how quantity supplied responds to price changes, showing producer flexibility in adjusting output. With Point A (P=

50, Qs=1,000) and Point B (P=

60, Qs=1,000), the quantity supplied remains constant at 1,000 tickets despite the price increase. Since %ΔQs = 0 (no change in quantity), PES = 0%/[any %ΔP] = 0, representing perfectly inelastic supply. Don't confuse this with undefined elasticity—PES is defined and equals zero when quantity doesn't change at all, regardless of price movements. To identify perfectly inelastic supply, look for situations with absolute capacity constraints (like fixed venue seats), recognize that the supply curve is vertical, and understand that PES = 0 means producers cannot adjust quantity at any price within the relevant range.

Question 19

Using the supply data shown for a small electronics assembler, calculate the price elasticity of supply (PES) between the two points using the midpoint method. Assume the firm can add a second shift within a month, making input use more flexible.

Points: from $P =$ 50, Q_s = 80 $to$ P = $60, Q_s = 120$ .

PES = 0.50
PES = 1.00
PES = 2.00 (correct answer)
PES = 4.00
PES = -2.00

Explanation: This problem tests your ability to calculate price elasticity of supply (PES), which measures how responsive producers are to price changes. PES equals the percentage change in quantity supplied divided by the percentage change in price, revealing how flexible production is when market conditions change. Using the midpoint method with points (

50, 80 units) and (

60, 120 units): %ΔQs = (120-80)/100 × 100% = 40% and %ΔP = (60-50)/55 × 100% = 18.18%. Therefore, PES = 40%/18.18% = 2.2, which rounds to 2.00. A common misconception is using simple percentage changes instead of the midpoint method, which would give different results depending on which point you start from. The firm's ability to add a second shift within a month explains why supply is elastic (PES > 1), as production can expand significantly. To master PES calculations, always use the midpoint formula [(Q2-Q1)/((Q2+Q1)/2)] for both quantity and price changes, double-check your arithmetic, and interpret the result in context of the firm's production flexibility and time horizon.