00:01
So here we're asked to calculate an elasticity of supply for hot cocoa.
00:05
So first of all, elasticity is the percentage change in quantity with respect to the percentage change in price, how much quantity changes in response to a price change.
00:13
And we're asked to use the midpoint formula.
00:15
A midpoint formula is just a percentage change where we treat the new and the old values equally.
00:21
So normally percentage change is new minus old over old.
00:24
That gives a lot of weight in the calculation to the old value.
00:27
Instead, we're going to replace the old on the bottom with new plus old over two, right, treating the new and the old simultaneously equal with respect to the starting point, right? so now, where did we start and where did we end up for hot cocoa, right? we're given information here about coffee as well, but the coffee information is just a bait.
00:51
So the new price is 775, and the new quantity of hot cocoa is 103.
01:02
Now, the way the question is worded, it says the equilibrium price is 050.
01:07
That's actually, i believe, supposed to be 650, not 050.
01:11
It looks like the computer is interpreting that number a little bit incorrectly...