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When the price of a good rises form Rs 20 per unit to Rs 30 per unit, the revenue of the firm producing this good rises from Rs 100 to Rs 300. Calculate the price elasticity of supply. |
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Answer» SOLUTION :Price, `P = Rs 20, TR = Rs 100` `:.` Quantity DEMANDED, `Q = (TR)/(P) = (100)/(20) = 5` Price, `P_(1) = Rs 30, TR = Rs 300` `:.` Quantity demanded, `Q_(1) = (TR)/(P) = (300)/(30) = 10` `DP = P_(1) - P = Rs 30 - Rs 20 = Rs 10` or `DQ = Q_(1) - Q = 10 - 5 = 5` units `:. E_(s) = (Delta Q)/(DeltaP) xx (P)/(Q) = (5)/(10) xx (20)/(5) = 2` |
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