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Price Elasticity of Supply of a Good is 2. a Producer Supplies 100 Units of a Good at a Price of Rs 20 per Unit. at What Price Will He Supply 80 Units? - Economics

Price elasticity of supply of a good is 2. A producer supplies 100 units of a good at a price of Rs 20 per unit. At what price will he supply 80 units?

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Solution

Given

Es=2

Actual Quantity (Q0)=100

Actual Price (P0)= Rs 20

New in Quantity (Q1)= 80

Change in Quantity Supplied (ΔQ)=Q1-Q0=80-100 = - 20

New in Price (P1) = ??

`E_s=(+)(DeltaQ)/(DeltaP)xxP_0/(Q_0)`

`2=(+)(-20)/(DeltaP)xx20/100`

ΔP=-2

We know that

ΔP=P1-P0

So -2=P1-20

∴P1=18

Hence, new price is Rs 18. The seller will supply 80 units at Rs 18 per unit

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