Quantity supplied of a commodity increases by 25% when its price rises from Rs 4 per unit to Rs 5 per unit, Calculate elasticity of supply
Answers
Answer:
Elasticity of Supply is = 1
Explanation:
Elasticity of supply is calculated by the formula -
% Change in Quantity Supplied of Commodity / % Change in Price of Commodity
The % Change in Qty supplied is already given in the question as 25%. We can calculate the % Change in price by (5-4)/4 [ Formula is New Price - Old Price/Old Price]
= 1/4 = 25%.
Therefore, the elasticity of supply is 25%/25% = 1
Answer:
The elasticity of grant is 1, which capability that the proportion exchange in extent provided is equal to the share alternate in price.
Explanation:
From the above question,
They have given :
The quantity supplied of a commodity increases by 25%
It's price rises from Rs 4 per unit to Rs 5 per unit.
Here we need to calculate the elasticity of supply.
Elasticity of Supply = proportion exchange in extent furnished /
proportion exchange in price
Q1 = (1 / 1.25) x Q2
where Q2 is the closing extent provided when the rate is Rs. 5 per unit.
Now, we can calculate the share trade in volume furnished and the proportion trade in price:
Percentage alternate in volume furnished = [(Q2 - Q1) / Q1] x 100%
= [(Q2 - (1 / 1.25) x Q2) / (1 / 1.25) x Q2] x 100%
= 25%
Percentage trade in fee = [(P2 - P1) / P1] x 100%
= [(5 - 4) / 4] x 100%
= 25%
Substituting these values in the formula, we get:
Elasticity of Supply = 25% / 25%
Elasticity of Supply = 1
Therefore, the elasticity of grant is 1, which capability that the proportion exchange in extent provided is equal to the share alternate in price.
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