Question

A firm sells 40 units of commodity X when its price is * 10. At what
price it will sell 60 units of the commodity if its price elasticity of supply is 0.8.​

Answer 1

Price will be = 3.75

Step by step explanation :

We have given ;

• Elasticity of Supply = 0.8

• Orginal quantity = Q = 40

• New quantity = Q¹ = 60

• Orignal Price = P = 10

• New Price = P¹ = ?

Change in Quantity = Orginal quantity - New quantity

• ∆Q = 40 - 60 = -20

Change in price=Orignal Price - New Price

• ∆P = 10 - x = ?

Es = ∆Q/∆P × P/Q

• 0.8 = -20/x ×10/40

• x = 6.25

• ∆P = 6.25

Here as we know supply is increasing so by the rule of demand and supply , price will be decreasing.

• P - ∆P = P¹

• 10 - 6.25 = 3.75 Ans.