Question

Price of a commodity increases by ₹ 5 per unit and due to this, supply increases from 100 units to 150 units. Determine price elasticity of supply, if original price was ₹ 25 per units.

Answer 1

Initial Price (P) = ₹ 25

Change in Price (ΔP) = 5

Initial Quantity Supplied (Q) = 100 units

New Quantity Supplied (Q₁) = 150 units

Change in Quantity Supplied (ΔQ) = 150 − 100 = 50 units

E_s = `(ΔQ)/(ΔP) xx P/Q`

= `50/5 xx 25/100`

= 10 × 0.25

= 2.5

The price elasticity of supply is 2.5