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The Market Price of a Good Changes From Rs 5 To Rs 20. as a Result, the Quantity Supplied by a Firm Increases by 15 Units. - Economics

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Sum

The market price of a good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the initial and final output levels of the firm.

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Solution

Elasticity of Supply, es = 0.5

Initial Price, P1 = Rs 5

Final price, P2 = Rs 20

ΔP = P2 − P1

= 20 − 5

ΔP = 15

ΔQ = 15

`e_s=(DeltaQ)/(DeltaP)xxP_1/Q_1`

`rArr0.5=15/15xx5/Q_1`

`rArr0.5=5/Q_1`

`rArrQ_1=5/0.5=10 " units"`

Initial quantity = 10 units

Final quantity, Q2 = ΔQ + Q1

= 15 + 10

Therefore, Q2 = 25 units

Concept: Price Elasticity of Supply
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APPEARS IN

NCERT Class 11 Economics Introductory Microeconomics
Chapter 4 The Theory Of The Firm Under Perfect Competition
Exercise | Q 26 | Page 70
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