Question

When price falls by Rs 2 per unit, supply falls from 100 units to 80 units. Price elasticity of supply is 2. What was the price per unit before change?Calculate.

Answer 1

 

Given that

Actualquantity(Q) = 100, New quantity supplied(Q₁) = 80 and E_s = 2

Change in price (ΔP) = 2

ΔQ = Q₁ - Q

     = 80 - 100 = (-)20

`"Price elasticity of supply"(E_s)=(DeltaQ)/(DeltaP)xxP/Q`

                                          `2=((-)20)/2xx?/100`

                                           P = (-)20

Initially, the pricewas Rs 20 per unit i.e. before the quantity change.