Question

The quantity supplied of a commodity at a price ₹ 10 per unit is 1250. Its price elasticity is 1. Calculate the price at which its quantity supplied will be 750.

Answer 1

Given:

Initial Price (P₁) = ₹10

Initial Quantity Supplied (Q₁) = 1250 units

New Quantity Supplied (Q₂) = 750 units

Price Elasticity of Supply (PE_S) = 1

We have to find the new price (P₂).

`e_s = "Proportionate Change in Quantity Supplied"/ "Proportionate Change in Price"`

Proportionate Change in Quantity Supplied = `(Q_2 - Q_1)/Q_1 xx 100`

= `(750 - 1250)/1250 xx 100`

= `(-500)/1250 xx 100`

= −40%

we use the formula:

`1 = (-40%)/"Proportionate Change in Price"`

% change in price = `(P_2 - P_1)/P_1 xx 100`

`−40 = (P_2 - 10)/10 xx 100`

Divide both sides by 100:

`−0.4 = (P_2 - 10)/10`

Multiply both sides by 10:

 = P_2​ − 

P_2​ = 10 − 4

= 6

The new price is ₹ 6 per unit when the quantity supplied is 750 units.