Price of commodity A is 10 per unit and total revenue at this price is 1600. When it's price rises by 20% , total revenue increase by 800. Calculate price elasticity of supply with explanation
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Price of commodity A = 10 / unit
Total revenue = 1600
No of commodity = 1600/10 = 160 units
When price rises by 20%,
Price of commodity = 10 + 10×20/100
Price of commodity = 12 / unit
Total revenue = 1920
But,
Total revenue increase by 800,
Total revenue = 1600 + 800
Total revenue = 2400
Now, Elasticity = 2400 - 1920
= 480
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