At the market price of Rs 10, a firm supplies 4 units of output. The m

1.	At the market price of Rs 10, a firm supplies 4 units of output. The market price increases to Rs 30. The price elasticity of the firm's supply is 1.25. What quantity will the firm supply at the new price?
Answer» Initial Price, P₁ = Rs 10 Initial Output, Q₁ = 4 units Final Price, P₂ = Rs 30 ΔP = P₂ - P₁ = Rs 30 - 10 = Rs 20 Elasticity of supply,e_s = 1.25 e_s =ΔQ/ΔP x P₁/Q₁ 1.25 = ΔQ/20 x 10/4 = 1.25 x 8 = ΔQ = ΔQ = 10 units Thus final output supplied, Q₂ = ΔQ + Q₁ Q₂= 10 + 4 = 14 units

At the market price of Rs 10, a firm supplies 4 units of output. The market price increases to Rs 30. The price elasticity of the firm's supply is 1.25. What quantity will the firm supply at the new price?

Answer»

Initial Price, P₁ = Rs 10
Initial Output, Q₁ = 4 units
Final Price, P₂ = Rs 30

ΔP = P₂ - P₁

= Rs 30 - 10 = Rs 20
Elasticity of supply,e_s = 1.25

e_s =ΔQ/ΔP x P₁/Q₁

1.25 = ΔQ/20 x 10/4

= 1.25 x 8 = ΔQ

= ΔQ = 10 units

Thus final output supplied, Q₂ = ΔQ + Q₁

Q₂= 10 + 4 = 14 units

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At the market price of Rs 10, a firm supplies 4 units of output. The market price increases to Rs 30. The price elasticity of the firm's supply is 1.25. What quantity will the firm supply at the new price?

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