Description of price elasticity of supply
Suppose the supply for good x is estimated by the following equation:
Q(x) supplied = 4 + 0.8P(x) - 0.2P(x)expcted - 0.4W
Where;
Q(x) supplied = quantity supplied of x
P(x) = current average good of x
P(x) expected = expected price of good x
W = average wage rate
Suppose;
P(x) = $5
P(x) expected = $6
W = $4.5
a) find out the price elasticity of supply for x [slope * (P(x)/Q(x)]. What type of elasticity is this?
b) Is good x storable? describe numerically the data you are using to suppor answer?