question_answer

When price of a good rises from Rs. 10 to Rs. 12 per unity, the producer supplies 10 percent more. Calculate price elasticity of supply.

Answer:

Percentage Change in quantity supplied =10%

Original price (P) = Rs. 10/ unit

New Price (P1) =Rs. 12/unit

Change in price \[(\Delta P)\]= Rs. 2/ unit (\[Rs.\text{ }12Rs.\text{ }10\])

Percentage change in price \[=(\Delta P\div P)\times 100\]

\[=(2\div 10)\times 100\]

= 20%

Price Elasticity of Supply \[=\frac{\text{percentage}\,\,\text{Change}\,\,\text{in}\,\,\text{quantity}\,\,\text{supplied}}{\text{Pecentage}\,\,\text{Change}\,\,\text{in}\,\,\text{price}}\]

\[Es=10\div 20\]

\[=1\div 2\]

= 0.5