question_answer

When price of a good rises from Rs 8 per unit to Rs10 per unit, producer supplies 40 units more. Price elasticity of supply is 2. What is the quantity supplied before the price change? Calculate.

Answer:

Change in quantity supplied \[(\Delta Q)\] = 40 units

Old price = Rs. 8/ unit

New price = Rs. 10/ unit

Price elasticity of supply is Rs. 2

Quantity =?

\[\Delta P=\] new price \[\] old price

\[=108\]

= 2/ unit

Es = (\[\Delta Q\,\,\div \,\Delta P\]) \[\times \] \[(P\div Q)\]

\[2=(40\div 2)~\times (8\div Q)\]

\[2=(20)\times ~(8\div Q)\]

2 = 160\[\,\div \]Q

\[2Q=160\]

\[Q=1602\]

= 80 units

Hence, quantity supplied before price change was 80 units.