Chapter 4: Problem 6, Advanced Analysis, on page 91.
Questions:
Currently, at a price of $1 each, 100 popsicles are sold per day in the perpetually hot town of Rostin. Consider the elasticity of supply. In the short run, a price increase from $1 TO $2 is unit- elastic (Es = 1.0). So how many popsicles will be sold each day in the short run if the prices rises ro $2 each? In the long run, a price increase from $1 to $2 has an elasticity of supply of 1.50. So how many popsicles will be sold per day in the long run if the price rises to $2 each?
Answer:
To answer this question we need to use the midpoint formula. Assume we have the two ordered pairs (Q1,P1) and (Q2,P2). We can then solve this equation to determine the quantity sold as a result of a price increase.
For the short run we have the following information. with the ordered pairs of (100,1) and (Q2,2). Here we need to solve for Q2. Substituting the values into the above formula, we have:
(Q2- 100) (Q2-100)
(Q2+100)/2) Q2+100)/2)
Es= 1= __________=___________ (2-1) (1) (2+1)/2) (1.5)
This implies
(Q2- 100) = (1)
(Q2+100)/2) (1.5) ------ Q2-100 = (2) (Q2) + 50) (3) (2)
Solving for Q2 we have the following:
Q2-100= Q2 + 100 ------ 2 Q2= 400 ------- Q2= 3 400 = 200 3 3 3 3 2 3
We can do the same exercise for the long run. Here we have the following information. Es = 1.5 With the ordered pairs of (100,1) and (Q2,2). Here we need to solve for Q2.

(Q2- 100) (Q2-100)
(Q2+100)/2) Q2+100)/2)
Es= 1.5= __________=___________ (2-1) (1) (2+1)/2) (1.5)
This implies:
(Q2-100)
(Q2+100)/2) = 1 ----- Q2-100 = Q2 + 50 ----- Q2 = 150 ------ Q2 = 300 2 2
Thus, we sell 200 popsicles in the short run and 300 in the long run when price increases from $1 to $2.

Chapter 5: Problem 4, Advanced Analysis, a through c, on