Question

The price elasticity of supply of a commodity is 2. A firm supplies 200 units of it at a price of Rs 8 per unit. At what price will it supply 250 units?

Answer 1

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Answer 2

At the price of Rs.9 per unit, the supplier will supply 250 units.

Here, the price elasticity of supply of commodity=2, supply of that commodity= 200 units, price for one unit of that commodity=8

What will be the supply for 250 units

So, we come to know that,

$E_{s}$=2, Q= 200, $Q_{1}$=250, P= 8, $P_{1}$=?

By the formula,

$E_{s}$= ΔQ x P

      ΔP    Q

where ΔQ= $Q_{1}$-$Q$

 ∴ ΔQ= 250-200

∴ ΔQ= 50

Similarly, ΔP= $P_{1}-P$

Using the values in the formula

$E_{s}$= ΔQ x P

      ΔP    Q

2 = 50 x 8

     ΔP   200

400 x ΔP = 400

∴ ΔP = 400

           400

∴ ΔP = 1

Thus, ∴ ΔP = $P_{1}-P$

1 = $P_{1}$- 8

∴ $P_{1}$ = 8+1

∴ $P_{1}$ = 9

Thus, the price is Rs.9

The supplier will supply 250 units at a price of Rs.9 per unit.

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