Question

At a price of 10 per unit, The supply of a commodity is 300 units. Its elasticity is 1.5. Its prices rises

by 20%. Calculate its supply at the increased price.​

Answer 1

Answer:

Quantity Supplied = 394.74 units

Explanation:

Given, At Price, P1 = ₹ 10 quantity supplied, Q1 = 300.

Elasticity,E = 1.5

%∆ P = 20%

Elasticity of supply is measured by

E = % ∆ Q / % ∆ P

$e = \frac{(q2 - q1)(p2 + p1)}{(q2 + q1)(p2 - p1)}$

$1.5 = \frac{(q2 - 300)(12 + 10)}{(q2 + 300)(12 - 10)}$

$1.5 = \frac{22(q2 - 300)}{2(q2 + 300)}$

$1.5q2 + 450 = 11q2 - 3300$

$9.5q2 = 3750$

$q2 = 394.74$