Question

When price of a good rises from Rs 8 per unit to Rs 10 per unit, producer supplies 40 units more. Price elasticity of supply is 2. What is the quantity supplied before the price change? Calculate

Answer 1

Given that

P = Rs 8, P₁ = Rs 10 and E₂ = 2

Change in quanitity supplied (ΔQ) = 40

ΔP=P₁ - P

=10-8=2

Price elasticity of supply `(E_s)=(DeltaQ)/(DeltaP)xxP/Q`

`2=40/2xx8/Q`

`2=160/Q`

2Q = 160

Q = 80 units

Initially, the quanitity supplied was 80 units i.e. before the price change.