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Chapter 5: Q.7 (page 130)

What would the gasoline price elasticity of supply mean to UPS or FedEx?

Short Answer

Expert verified

The percentage change in quantity delivered due to a given percentage change in gasoline price.

Step by step solution

01

Definition

Price elasticity:

The ratio of the percentage change in quantity demanded of a product to the percentage change in price is known as price elasticity of demand. Economists use it to figure out how supply and demand change when the price of a product changes.

02

Explanation

Gasoline price elasticity to supply methods such as UPS or FedEx is the percentage change in quantity supplied as a result of a given percent change in gasoline price. The elasticity of gasoline costs in terms of providing delivery services to UPS or FedEx. Assume that apples have a cross-price elasticity of 0.4 to the price of oranges and that the price of oranges falls by 3%.

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Most popular questions from this chapter

The equation for a demand curve is P = 2/Q. What is the elasticity of demand as price falls from 5 to 4? What is the elasticity of demand as the price falls from 9 to 8? Would you expect these answers to be the same?

Can you think of an industry (or product) with near-infinite elasticity of supply in the short term? That is, what is an industry that could increase Qs almost without limit in response to an increase in the price?

If supply is inelastic, will shifts in demand have a larger effect on equilibrium price or on quantity?

If demand is inelastic, will shifts in supply have a larger effect on equilibrium price or on quantity?

What is the formula for the wage elasticity of labor supply?
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