Question

When the price of a commodity falls from Rs 10 per unit to Rs 9 per unit its quantity supplied falls by 20 percent .Calculate its price elasticity of supply.is its supply elastic?

Answer 1

Here Given that :-

P = Rs 10

P1 = Rs 9

Percentage change in quantity supplied = -20%

Now as we know that

$es \: = \frac{percentage \: change \: in \: quantity \: supplied}{percentage \: change \: in \: price}$

So we have already given%tage change in quantity supplied. Now we have to find percentage change in price of the commodity.

%tage change in price= $\frac{Change in P}{P}$×100 .

∆P = P1 - P

∆P = 9 - 10

∆P = -1

percentage change in price = $\frac{-1}{10}$×100 .

= -10%

Es = $\frac{20%}{10%}$

Es = 2

Hence Es is greater than unity refers supply is elastic.