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A firm supplies 10 units of a good at a price of Rs 5 per units. Price elasticity of supply is 1.25. What quantity will the firm supply at a price of Rs 7 per units ? |
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Answer» Solution :As given in the question, `Q^(s) = 10, P = 5 and E^(s) = 1.25` At new price of Rs 7 PER unit `DELTA P = 7 - 5 = 2` We know, `E_(s) = (Delta Q)/(Delta P) xx (P)/(Q)` or, `1.25 = (DeltaQ)/(2) xx (5)/(10)` or, `Q = 1.25 xx 4 = 5` Thus, the new quantity that the firm WOULD supply at a price of Rs 7 per units is 15 (5 + 10). |
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