Question

If price of a commodity rises from ₹ 10 per kg to 12 per kg, the quantity supplied expands from 500 kg to 600 kg. What is elasticity of supply?

Answer 1

Initial Price (P) = ₹ 10

New Price (p1) = ₹ 12

Change in Price (ΔP) = 12 − 10 = 2

Initial Quantity Supplied (Q) = 500 kg

New Quantity Supplied (Q₁) = 600 kg

Change in Quantity Supplied (ΔQ) = 600 − 500 = 100 kg

E_s = `(ΔQ)/(ΔP) xx P/Q`

= `100/2 xx 10/500`

= `50 xx 10/500`

= `500/500`

= 1

The price elasticity of supply is 1.