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Question
The coefficient of elasticity of a commodity is 0.4. What percentage change in supply will take place if its price rises 20%?
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Solution
Percentage Change in Quantity Supplied = Elasticity of Supply (Es) × Percentage Change in Price
Elasticity of Supply (Es) = 0.4
Percentage Change in Price = 20%
Percentage Change in Quantity Supplied = 0.4 × 20%
= 8%
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