when the price of a commodity changes from rs 4 per unit to rs 5 per unit, its market supply rises from 100 units to 120 units. calculate the price elasticity of supply. Is supply elastic? give reason.
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At price Rs 4, demand = 100
At price Rs 5, demand = 120
Price Elasticity = rise in quantity/ Rise in price X original price/original quantity
= 20/1 X 4/100 = 0.8
The supply is more elastic as the demand increases with price.
At price Rs 5, demand = 120
Price Elasticity = rise in quantity/ Rise in price X original price/original quantity
= 20/1 X 4/100 = 0.8
The supply is more elastic as the demand increases with price.
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20/4 ×4/100= 0.8 ...
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