Question

When the price of a commodity rises from ₹ 10 to ₹ 11 per unit, its quantity supplied rises by 100 units. Its price elasticity of supply is 2. Calculate the quantity supplied at the increased price.

Answer 1

Calculate the percentage change in price:

Percentage change in price = `(11 - 10)/10 xx 100`

= 10%

Now use the PES formula:

`e_s = "Proportionate Change in Quantity Supplied"/"Proportionate Change in Price"`

`2 = "Proportionate Change in Quantity Supplied"/(10%)`

Proportionate Change in Quantity Supplied = 2 × 10%

Proportionate Change in Quantity Supplied = 20%

Let the original quantity supplied be Q.

Since the quantity increased by 100 units, and that represents 20% of the original supply:

20% of x = 100 units

∴ `20/100​ × x` = 100

0.2x  = 100

Divide both sides by 0.2.

x = `100/0.2`

x = 500

New quantity supplied = 500 + 100 = 600 units

Quantity supplied at the increased price = 600 units