Question

The price of a commodity is ₹ 12 per unit and its quantity supplied is 500 units. When its price rises to 15 per unit, its quantity supplied rises to 650 units. Calculate its price elasticity of supply. Is its supply elastic?

Answer 1

Initial Price (P) = ₹ 12

New Price (P₁) = ₹ 15

Change in Price (ΔP) = 15 − 12 = 3

Initial Quantity Supplied (Q) = 500 units

New Quantity Supplied (Q₁) = 650 units

Change in Quantity Supplied (ΔQ) = 650 − 500 = 150 units

Es = `(ΔQ)/(ΔP) xx P/Q`

= `150/3 xx 12/500`

= `50 xx 12/500`

= `600/500`

= 1.2

Price Elasticity of Supply is 1.2