Question

the price of commodity Rises from rupees 5 to 6 due to which its supply increases by 20%.comment on the price of elasticity of supply



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Answer 1

Answer:

Price elasticity of supply = % change in quantity supplied / % change in price

Therefore, Price elasticity of supply= ((120-100)/(120+100))*( (5-4)/(5+4))

= 0.80

Since, price elasticity of supply is less than 1, supply of this commodity is inelastic. This means that a shift in price won't drastically affect the supply of the commodity.

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