Question

When price of a good raises from Rs 12 per unit to Rs 15 per unit the producer supplies 50 per cent more output. What is the price elasticity of supply? Calculate.

Answer 1

 

Given that

Percentage change in quanity supplied is 50

P=Rs12 and P₁ = Rs 15

ΔP = P₁-P

=15-12

=3

Percentage change in price =`(DeltaP)/Pxx100`

`=3/12xx100=25%`

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

`=(50%)/(25%)= 2`