Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

44 THE MEASUREMENT OF ELASTICITIES [CHAP. 3
Table 3.5(b)
Before
After
Commodity
Price
(cents/unit)
Quantity
(units/month)
Price
(cents/unit)
Quantity
(units/month)
Lemon (Z) 10 20 20 15
Tea (X) 20 40 20 35
3.6 PRICE ELASTICITY OF SUPPLY
The coefficient of price elasticity of supply (e s ) measures the percentage change in the quantity supplied of
a commodity per unit of time (DQ=Q) resulting from a given percentage change in the price of the commodity
(DP=P). Thus
e s ¼ DQ=Q
DP=P ¼ DQ
DP P Q
When the supply curve is positively sloped (the usual case), price and quantity move in the same direction
and e s . 0. The supply curve is said to be elastic if e s . 1, inelastic if e s , 1, and unitary elastic if e s ¼ 1. Arc
and point e s can be found in the same way as arc and point e. When the supply curve is a positively sloped
straight line, then, all along the line, e s . 1, if the line crosses the price axis; e s , 1, if it crosses the quantity
axis; and e s ¼ 1, if it goes through the origin.
EXAMPLE 8. To find e x for a movement from point A to point C, from C to A and midway between A and C (i.e., at point
B) and midway between C and F (i.e., at point D) for the values of Table 3.6, we proceed as follows:
Table 3.6
Point P x ($) Q x
A——— 6 ––––8000
B 5 6000
C——— 6 ––––4000
D 3 2000
F——— 2 ——— 0
From A to C,
e s ¼ DP
DP P A
Q A
¼
From C to A, e s ¼ 4000
2
At point B,
At point D,
4000
2
4
4000
e s ¼ DQ
DP P
A þ P C
¼ 4000
Q A þ Q C 2
6
8000
¼ 2
e s ¼ DQ
DP P
C þ P F
¼ 4000
Q C þ Q F 2
¼ 1:5
10
12,000
6
4000
ffi 1:67
¼ 3