Question

1: At the market price Rs 10 a firm supplies 4 units of outputs. The market price increases to Rs 30.

The price elasticity of the firm supply is 1.25. What quantity will the firm supply at the new price?​

Answer 1

Answer:

14 units

Explanation:

Initial price of the unit = P1 = Rs 10 (Given)

Initial output of the unit = Q1 = 4 units (Given)

Final Price of the unit = P2 = Rs 30 (Given)

Therefore,

Price = ΔP = P2 - P1

= 30 - 10

= 20

Elasticity of supply, es = 1.25

es =ΔQ/ΔP x P1/Q1

1.25 = ΔQ/20 x 10/4

= 1.25 x 8 = ΔQ

= ΔQ = 10 units

Thus, the final output supplied will be -

= Q2 = ΔQ + Q1 Q2

= 10 + 4

= 14 units

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Answer 2

Question :-

At the market price Rs 10 a firm supplies 4 units of outputs. The market price increases to Rs 30. The price elasticity of the firm supply is 1.25. What quantity will the firm supply at the new price?

Answer :-

14 Units

Calculation :-

Initial Price, P1 = Rs 10

Initial Output, Q1 = 4 units

Final Price, P2 = Rs 30

➡ΔP = P2 - P1 = Rs 30 - 10 = Rs 20

➡Elasticity of supply,es = 1.25

➡es =ΔQ/ΔP x P1/Q

➡1 1.25 = ΔQ/20 x 10/4

= 1.25 x 8 = ΔQ

= ΔQ = 10 units

Thus final output supplied, Q2 = ΔQ + Q1

✒ Q2 = 10 + 4 = 14 units.

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