Question

2. As a result of 15 per cent rise in the price of a commodity, its supply increases from 25 units to 30
units. Calculate elasticity of supply.
[Ans. Es = 1.33]​

Answer 1

Explanation:

Price Elasticity of a supply Es = (Percentage change in the quantity of supply) Qs/ (Percentage change in the price of the commodity) Ps.

Qs = 25 % since there is a change in the quanity of supply by 25 %

Ps = 50% since there is a change in the price of the quantity by 50 %

Thus, Es = 25/50 = 0.5.

Since, Es is less than 1 but not equal to 0 it is inelastic which is also the degree of price elasticity.

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