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29 September, 04:26

The price elasticity of demand is - 1.25, and the share of the tax borne by consumers is 0.80. what is the price elasticity of supply?

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  1. 29 September, 07:16
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    Price elasticity of demand is - 1.25 = Ed

    Price elasticity of supply = Es

    Share of tax by consumers = 0.80 = Es / (Ed + Es) = Es / Es + 1.25

    0.8 Es + 1 = Es

    1 / 0.2 = Es = 5

    Therefore, the price elasticity of supply is 5
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