Given that the price elasticity of supply for oranges is 1.5 and 1,000 oranges are supplied per week at \$1.50 per orange, how many oranges will be supplied per week at \$2.00 per orange?

• A. 1,250 oranges
• B. 2,000 oranges
• C. 1,500 oranges
• D. 1,200 oranges

Answer: (C)

Verified step by step guidance

1. Identify the given variables: the price elasticity of supply (E_s) is 1.5, the initial price (P_0) is \$1.50, the new price (P_1) is \$2.00, and the initial quantity supplied (Q_0) is 1,000 oranges.
2. Recall the formula for price elasticity of supply: \[ E_s = \frac{\% \text{ change in quantity supplied}}{\% \text{ change in price}} \]
3. Calculate the percentage change in price using the formula: \[ \% \text{ change in price} = \frac{P_1 - P_0}{P_0} = \frac{2.00 - 1.50}{1.50} \]
4. Use the elasticity formula to find the percentage change in quantity supplied: \[ \% \text{ change in quantity supplied} = E_s \times \% \text{ change in price} \]
5. Calculate the new quantity supplied (Q_1) by applying the percentage change to the initial quantity: \[ Q_1 = Q_0 \times (1 + \% \text{ change in quantity supplied}) \]