Question

When price of a good rises from Rs 10 to Rs 12 per unit the producer supplies 10 percent more. Calculate price elasticity of supply.

Answer 1

Given that
P₀= Rs 12, P₁ = Rs 9

Percentage change in quantity supplied =(-)75%

Change in price (ΔP)=P₁- P₀

= 9-12

= (-3)

Percentage change in price = `(DeltaP)/P_0xx100`

`=((-3))/12xx100=-25%`

`"Price elasticity of supply" (E_s)="Percentage change in quantity supplied"/"Percentage change in price"`

`=((-)75%)/((-)25%)=3`