1.

The price elasticity of supply of a commodity is 2.0. A firm supplies 200 units of it at a price of Rs 8 per unit. At what price will it supply 250 units ?

Answer»

Solution :Given, `E_(s) = 2, P = Rs 8, Q = 200` UNITS, `Q_(1) = 250` units
`:. Delta Q = Q_(1) - Q = 250 - 200 = 50` units
Let the CHANGE in price, `Delta P = x`
We know that,
`E_(s) = (Delta Q)/(Delta P) xx (P)/(Q) or 2 = (50)/(x) xx (8)/(200) = (2)/(x)`
or `2x = 2x = 1 ro Delta P = 1`
New price, `P_(1) = P + Delta P = 8 + 1 = Rs 9`


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