Question

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.

Answer 1

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.

Answer 2

20/4 ×4/100= 0.8 ...