Question

A Firm supplies 10 units of a good at a price of 5 per unit . price elasticity of supply is 1.25 what quandity will the firm supply at a price of ₹ 7 per unit​

Answer 1

Explanation:

Let the firm supply X units at the new price.

P=Rs.10;P

1

=Rs.30;

ΔP=P

1

−P=Rs.30−Rs.10=Rs.20

Q=4units;Q

1

=Xunits;

ΔQ=Q

1

−Q=(X−4)units

E

s

=1.25

E

s

=

Q

P

×

ΔP

ΔQ

1.25=

4

10

×

20

(X−4)

⇒1.25=

8

(X−4)

⇒X−4=10

⇒X=10+4=14 units.