Question

Price elasticity of supply of a good is 2. By what percentage should its price rise so that its supply rises by 30 per cent?

Answer 1

% Change in Quantity Supplied = 30%

Price Elasticity of Supply (E_s) = 2

% Change in Price = Let this be X

E_s = `("% Change in Quantity Supplied")/("% Change in Price")`

2 = `(30%)/X`

X = `(30%)/2`

X = 15%

The required percentage rise in price is 15%.