1)Given the supply function = +

• Find the arc elasticity of supply when increases from 5 to 6.

• Find the point elasticity of supply when = and compare your answer with (a) above.

• Show that the point elasticity is always smaller than 1, but approaches a limiting value of 1 as approaches infinity.

• Sketch the graph of the supply function, showing how the elasticities may be measured geometrically.

2)Given the supply function = . + + find the arc elasticity when decreases from 5 to 4, and compare your answer with the point elasticity when = . Why are the arc and point elasticities so similar (but not exactly the same) in this case?