Question

Q1. According to the USA Today newspaper in March 2010: “A frigid Florida winter is taking its toll on your sandwich. The sunshine state is the main U.S. source for fresh winter tomatoes, and its growers lost some 70 percent of their crop during January’s prolonged cold weather. The average wholesale price for a 25-pound box of tomatoes is now $30, up from $6.50 a year ago. Florida’s growers would normally ship about 25 million pounds of tomatoes a week; right now, they are shipping less than a quarter (8million). High demand has driven up prices and wholesalers are buying from Mexico. Based on that, some restaurants provided tomatoes only on request.”

a. Calculate the price elasticity of demand for winter tomatoes as well as elasticity of supply using the midpoint method.

I need answer for both Es and Ed

Answer 1

Given ( P1 = Price In January, P0 = Price before winter, Q0 = Quantity before winter, Q1 = Quantity in January.

P1 = $30, P0 = $6.50, Q0 = 25, Q1 = 8

Using the formula for calculating price elasticity of demand:-

( a ) Ep ( Price elasticity of demand ) =

   ( ( 8 - 25 ) / ( 8 + 25 ) ) / ( ( 6.5 - 30 ) / ( 6.5 + 30 ) ) = 0.80

Elasticity of supply ( Es ) = ( ( 8 - 25 ) / ( 8 + 25 ) ) / ( ( 30 - 6.5 ) / ( 30 + 6.5 ) ) = - 0.80