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At the Market Price Of Rs 10, a Firm Supplies 4 Units of Output. the Market Price Increases To Rs 30. the Price Elasticity of the Firm’S Supply is 1.25. - Economics

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Sum

At the market price of Rs 10, a firm supplies 4 units of output. The market price increases to Rs 30. The price elasticity of the firm’s supply is 1.25. What quantity will the firm supply at the new price?

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Solution

Initial Price, P1 = Rs 10

Initial Output, Q1 = 4 units

Final Price, P2 = Rs 30

ΔP = P2 − P1

= Rs 30 − 10 = Rs 20

Elasticity of supply, es = 1.25

`e_s=(DeltaQ)/(DeltaP)xxP_1/Q_1`

`rArr1.25=(DeltaQ)/20xx10/4`

⇒ 1.25 × 8 = ΔQ

⇒ ΔQ = 10 units

Thus final output supplied, Q2 = ΔQ + Q1

Q2 = 10 + 4 = 14 units

Concept: Price Elasticity of Supply
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APPEARS IN

NCERT Class 11 Economics Introductory Microeconomics
Chapter 4 The Theory Of The Firm Under Perfect Competition
Exercise | Q 27 | Page 70
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