Question

if the price of a commodity be raised by 40 but the supply increse by only 15% supply of such commodity would be.
(a) Excessive elastic
(b) Elastic
(c) inelastic
(d) completely inelastic.
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Answer 1

Answer:

c) inelastic

15/40 = 0.375

Explanation:

it comes under inelastic supply

Answer 2

Answer:

option b (Inelastic)

Explanation:

Price Elasticity of a supply Es = (Percentage change in the quantity of supply) Qs/ (Percentage change in the price of the commodity) Ps.

Qs = 25 % since there is a change in the quanity of supply by 25 %

Ps = 50% since there is a change in the price of the quantity by 50 %

Thus, Es = 25/50 = 0.5.

Since, Es is less than 1 but not equal to 0 it is inelastic which is also the degree of price elasticity.