Question

As a result of 20% rise in the price of a commodity , its supply increases by 30% .Calculate the elasticity of supply.

Answer 1

es=1.5
es=
$\frac{\%change \: in \: quantity \: supplied}{\%change \: in \: price}$
$= \frac{30}{20}$
$= 1.5$
hence it is an elastic supply

Answer 2

Elasticity of supply = 1.5

Explanation:

Price elasticity of supply (PES) gives the relationship between change in quantity supplied to the change in price.

Given,

Percentage increse in price of commodity = 20%

Percentage increase in supply = 30%

Formula for elasticity of supply

Elasticity of supply = $\frac{Percentage\ change\ in\ quantity\ supply}{Percentage\ change\ in\ price}$

                                =$\frac{30}{20}$

                                = 1.5