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The price elasticity of supply of a commodity is 2. When its price falls from 10rs per unit to 8rs per unit, its quantity supplied falls by 500 units. Calculate the quantity supplied at th reduced price. |
Answer» Solution : Price Elasticity of Supply (ES) `=(DeltaQ)/(DeltaP)xx(P)/(Q)=2=(-500)/(-2)xx(10)/(Q)`, i.e., `Q=1,250` As price DECREASES, then quantity supplied will ALSO DECREASE. It MEANS, New Quantity =Original Quantity (Q)+Change in Quantity `(DeltaQ]=1250+(-500)=750` units New Quantity `=750` units |
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