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The price elasticity of supply of good X is half the price elasticity of supply of Good Y. A 10% rise in the price of good Y results in a rise in its supply from 400 units to 520 units. Calculate the percentage change in quantity supplied of good X when its price falls from 10rs to 8rs per unit. |
Answer» Solution :PES of X is half the PES of Y.  Percentage change in quantity supplied `=(DeltaQ)/(Q)xx100=(120)/(400)xx100=30%` PES = `("Percentage change in quantity supplied")/("Percentage change in price")=(30%)/(10%)=3` As, given in the question that PES of X is half of PES of Y If PES of `y=3`. Then PES of X=1.5  Percentage change in price `=(DeltaP)/(P)xx100=(2)/(10)xx100=20%` PES=`("Percentage change in quantity supplied")/("Percentage change in price ") ` `1.5=("quantity supplied")/(20%)` `30%=` Percentage change in quantity supplied As, price of commodity X FALLS, quantity supplied must ALSO fall as per LAW of supply. [So, decrease in quantity supplied of commodity `X=30%`] |
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