Question

A firm’s total revenue is Rs.800 when the price of the commodity is Rs.40. When the price increases to Rs.50, its revenue becomes  Rs.1200.Calculate the price elasticity of supply.​

Answer 1

Answer:

Given P=Rs.5;P  1  =Rs.10;

ΔP=P  1  −P=Rs.10−Rs.5=Rs.5

When price =Rs.5, total revenue (P×Q)=Rs.50

Quantity supplied Q= 50BY5 =10units

When price =Rs.10, total revenue (P  1    ×Q  1  )=Rs.100

New quantity supplied Q  1  =  100 by 10 =10units

Q=10units;Q  1  =10units;

ΔQ=Q  1 −Q=(10−10)=0units

Price elasticity of supply E  s =p by q ×  ΔQ  by  Δp =  5 by 1 ×  0 by 5 =0

Price elasticity of supply =0 (zero)

Explanation: