Question

The price elasticity of supply of commodity X and Y is equal.The price of X falls from 10 to 8 per unit and supply falls by 16%. The price of Y rises by 10%. Calculate the percentage increase in supply.

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Answer 1

HEYA FRIEND HERE IS YOUR ANSWER

Let the Elasticity of Supply for Goods X and Y be Ex and Ey.

Ex = Ey

Percentage Change in Price of Good X = {(8-10)/10}*100 = -20%

Ex = Percentage Change in Quantity Supplied of Good X/Percentage Change in Price of Good X

= -16/(-20) = 0.8

Ey = 0.8

Percentage Change in Quantity Supplied of Good Y/Percentage Change in Price of Good Y = 0.8

Percentage Change in Quantity Supplied of Good Y = 0.8*10 = 8%

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