(a)
Price elasticity of suppy = \(\frac{\Delta Q}{\Delta P}\) x \(\frac{P}{Q}\)
P = $20.00
Q = 500 gallons
\Delta Q = 500 - 400 = 100 gallons
\Delta P = $20.00 - $18.00 = $2.00
Es = \(\frac{100}{2}\) x \(\frac{20}{500}\)
Es = 2
(b) The supply is elastic. This is because the coefficient of price elasticity of supply is greater than one (Es > 1).
(c)(i)
(ii) Joint supply i.e. these two products are jointly supplied.
(d)(i) Change in the price of related products.
(ii) Cost of production.
(iii) Change in technology.
(iv) Government policy e.g. tax or subsidy
(v) Expectation of producers.
(vi) Number of producers.
(viii) Natural disaster
