question archive 1)The government is offering to buy rice at 15,000 Thai baht per metric ton, which is a 50% premium to the market
1)The government is offering to buy rice at 15,000 Thai baht per metric ton, which is a 50% premium to the market
Subject:EconomicsPrice:2.88 Bought3
1)The government is offering to buy rice at 15,000 Thai baht per metric ton, which is a 50% premium to the market. Assume this is forecast to increase supply by 25% in 2012. Calculate the price elasticity of supply.
2)Explain the meaning of the price elasticity supply figure you have calculated.
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1)Price elasticity of supply = Percentage change in supply/ Percentage change in price
Percentage change in price = 50%
Percentage change in supply = 25%
Therefore, The Price elasticity of supply = 25/50 = 0.5
2)This figure 0.5 means that the price elasticity of supply is inelastic.
