Question

A producer received rupees 10000 when the price of a commodity was rupees 100 per unit. The receipts increased to rupees 15000 when price increased by rupees 20.Calculate the elasticity of supply?

Answer 1

Answer:

Price Elasticity of Supply = 1.25

Step-by-step explanation:

Price      Quantity        Total Revenue ( P x Q)

100     10000/100 = 100       10000

120      15000/120 = 125        15000

Price Elasticity of supply is change in quantity supplied, due to change in price. Formula : (dQ / dP) x (P / Q)

(125 - 100) / (120 - 100)   x (100/100)

= 25/20 = 1.25