Question

A firm supplies 50 units of a commodity at Rs 4 per unit. When the price rises to Rs 6, the firm increased its supply to 75 units. What will be the price elasticity of supply?​

Answer 1

Answer:

Let the firm supply X units at the new price.

P=Rs.10;P1=Rs.30;

ΔP=P1−P=Rs.30−Rs.10=Rs.20

Q=4units;Q1=Xunits;

ΔQ=Q1−Q=(X−4)units

Es=1.25

Es=QP×ΔPΔQ

1.25=410×20(X−4)

⇒1.25=8(X−4)⇒X−4=10

⇒X=10+4=14 units.

Answer 2

p1=4

q1=50

p2=6

q2=75

change in price=2

change in quantity= 25

%age change in price= 2/4 *100

=50%

%age  change in quantity= 25/50*100= 50%

price elasticity of supply= %age change in quantity/ %age change in price

=50/50

=1