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When Price of a Commodity Falls from Rs 12 per Unit to Rs 9 per Unit, the Producer Supplies 75 Percent Less Output. Calculate Price Elasticity of Supply. - Economics

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When price of a commodity falls from Rs 12 per unit to Rs 9 per unit, the producer supplies 75 percent less output. Calculate price elasticity of supply.

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Solution

 

Given that

P0 = Rs 12, P = Rs 9

Percentage change in quantity supplied =(-)75%

Change in price (ΔP)= P1 - P0

                            = 9-12

                            = (-3)

Percentage change in price = (ΔP/P0) x 100

                                        = (-3)/12 x 100

                                        = -25%

`"Price elasticity of supply" (E_s)="Percentage change in quantity supplied"/"Percentage change in price"`

                                            `=(-75%)/(-25%)=3`

 

Concept: Concept of Supply
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