Question

A producer supplies 100 units of a good at a price of Rs 20 per unit. Price elasticity of supply is 2. At what price will he supply 50 units? Calculate

Answer 1

Given that

Q₀ = 100 units

P₀ = Rs 20

P₁ =Rs 10

Q₁ = 50 units

As we know that

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

ΔP = P₁-P₀

ΔP =P₁-20

ΔQ=Q₁-Q₀

ΔQ= 50 - 100= - 50 units

`2=(-50)/(P_1-20)xx20/100`

P₁=Rs 15

Therefore,at aprice of Rs15, the Producer will supply 50 units.