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The price elasticity of supply of commodity X and Y are equal. The price of X falls from 10rs to 8rs per unit and its quantity supplied falls by 16 per cent. The price of Y rises by 10 per cent. Calcualte the percentage increase in its supply. |
Answer» Solution :PES of X is EQUAL to the PES of Y.  Percentage change in price`=(DELTAP)/(P)xx100=(2)/(10)xx100=20%` PES = `("Percentage change in quantity supplied")/("Percentage change in price")=(16%)/(20%)=0.8` As, PES of X= PES of Y [given]. [So, PES of Y =0.8]  PES = `("Percentage change in quantity supplied")/("Percentage change in price")` `0.8=("quantity supplied")/(20%)` As, price is increasing by `10%` then quantity supplied also INCREASES by `8%` as per LAW of supply. [So, Percentage change in quantity supplied of commodity `Y=8%`] |
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