Question

9. The supply of a commodity is 800 units at a price of the 12 per unit. What will be the new supply of
the commodity, if its price rises to 5 14 per unit and the elasticity of supply is 1.2?
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Answer 1

Answer:

Initial quantity supplied =800 unit

Initial price =12

Final quantity supplied =q1

Final price =14

Elasticity of supply = 1.2 (given)

Es= (change in quantity supplied / initial quantity supplied) / (change in price / initial price)

=(change in quantity supplied /800)/ (14-12/12)

Es =1.2= change in quantity supplied*12/ (800*2)

Change in wuantity supplied=1.2*800*2/(12)=1600/10=160

Final quantity q1= initial quantity + change in quantity

=800+160 =760

As price rises supply also rises.