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When the price of a commodity changes from ₹4 per unit to ₹5 per unit, its market supply rises from 100 units to 120 units. Calculate the price elasticity of supply. Is supply elastic ? Give reason. |
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Answer» Es = \(\frac{P}{Q}=\frac{\Delta Q}{\Delta P}\) where P = Original price Q = Original quantity supplied AP = Change in price AQ = Change in quantity supplied. Putting the given figures in above formula, we get Es = \(\frac{4}{100}\times\frac{20}{1}\) = 0.8 No, supply is not elastic because price elasticity of supply is less than 1 (one) or unity. |
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