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6 . Calculating the price elasticity of supply Charles is a stay-at-home parent who lives in New York City and teaches tennis lessons for extra cash. At a wage of $25 per hour, he is willing to teach 6 hours per week. At $35 per hour, he is willing to teach 16 hours per week. Using the midpoint method, the elasticity of Charles’s labor supply between the wages of $25 and $35 per hour is approximately , which means that Charles’s supply of labor over this wage range is .

Respuesta :

Answer:

a. 2.73

b. Elastic

Explanation:

Percentage change in hours = {(16 - 6) / [(16 + 6) / 2]} * 100 = 90.91%

Percentage change in wage = {(35 -25) / (35 + 25) / 2]} * 100 = 33.33%

Elasticity of Charles’s labor supply = 90.91% / 33.33% = 2.73

Therefore, the elasticity of Charles’s labor supply between the wages of $25 and $35 per hour is approximately 2.73, which means that Charles’s supply of labor over this wage range is elastic.

It is elastic because 2.73 is greater than 1.

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