You saw in Chapter 5 that economists often use arc elasticity when they calculate the price elasticity of demand. Similarly, they often use arc elasticity when they calculate the elasticity of supply. That is, they use the average of the new and the old quantity when they calculate the percentage change in quantity and the average of the new and the old p1ice when they calculate the percentage change in price. Use the idea of an arc elasticity to calculate the price elasticity of supply in the following examples, then determine if supply is relatively elastic or inelastic, or perfectly elastic or inelastic.
a. When the price of a pen increased from $1.00 to $1.25, the quantity supplied by a firm increased from 200 to 300 pens.
b. When the price of bottled water decreased from $1.25 to $1.20, the quantity supplied by a firm decreased from 1,000 to 980 bottles.
c. Even though the price of an acre of land increased from $6,000 to $10,000, the quantity supplied did not change.