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Question 3: For each of the following supply curves, calculate the level of output O at which the elasticity of supply = 1, and indicate whether supply is elastic or inelastic at levels of O less than this point and at levels of O greater than this point: a. P=16+0.010 b. P=-4+./Q, for Q=16 c. P=60 Question 3: (a) ES = P/mQ, where m = dP/dQ, the slope of the demand curve at a given point. With P 16+ .01Q2, dP/dQ = .02Q, and ES = 16 + .01Q2/.02Q2 = 1 when .01Q2 = 16, or when Q = 40. Below Q= 40, demand is price-elastic, and above Q = 40, demand is inelastic. (b) With P =4 + Q1/2, we have dP/dQ = .5 Q-1/2, and ES = -4 + Q1/2/.5Q1/2 = 1 when Q1/2 = 8, or when Q = 64. Below Q= 64, demand is price-inelastic, and above Q = 64, demand is elastic. (c) With P = 6Q, we have m = dP/dQ = 6, and ES = P/mQ = 6Q/6Q = | at every point on the supply curve. Any supply curve that is a ray from the origin (P = 6Q, or P = Q, or P= .25Q) has a unitary price-elasticity of supply at every point