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A firm's revenue rises from Rs 400 to Rs 500 when the price of its product rises from Rs 20 per unit to Rs 25 per unit. Calaculate the price elasticity of supply |
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Answer» SOLUTION :Initital Total REVENUE `(TR_(1)) = Rs 400` Final Total Revenue `(TR_(2)) = Rs 500` Initial Price `(P_(1)) = Rs 20` Initital Price `(P_(2)) = Rs 25` `rArr` Change in Price `(Delta P) = Rs (25 - 20) = Rs 5` Initial QUANTITY Supplied `(Q_(2))` `= (TR_(1))/(P_(1)) = (400)/(20) = 20` units Final Quantity Supplied `(Q_(2))` `= (TR_(2))/(P_(2)) = (500)/(25) = 20` units `rArr` Change in Quantity `(Delta Q) = Rs (20 - 20) = Rs 0` `E_(s) = (((Delta Q))/(Q) xx 100)/(((Delta P))/(P) xx 100) = ((0)/(20) xx 100)/((5)/(20) xx 100) = 0` |
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