Question

A producer supplies 80 units of a good at a price of Rs 10 per unit. Price elasticity of supply is 4. How much will he supply at Rs 9 per unit?

Answer 1

Given that

Q₀ = 80 units

P₀ = Rs 10

E_s = 4

P₁ = Rs 9

ΔP = P₁ - P₀

ΔP = 9 - 10 = -1

ΔQ = Q₁ - Q0

ΔQ = Q₁ - 80

we know that

`E_s=(DeltaQ)/(DeltaP)xxP_0/Q_0`

`4=(Q_1-80)/-1xx10/80`

`4=(Q_1-80)/-8`

-32 = Q1 - 80

Therefore, Q1 = 48 units

48 units of a good will be supplied by a producer at Rs 9 per unit.