Question

A 15 per cent rise in the price of a commodity raises its supply from 300 units to 345 units. Calculate its price elasticity of supply.

Answer 1

Given, percentage change in price = 15%
Q= 300 units; $Q_1$ = 345 units;
$\Delta Q=Q_1-Q=(345-300)$ units = 45 units
Percentage change in quantity supplied
$=\frac{\Delta Q}{Q}\times 100=\frac{45}{300}\times 100=15$%
Price elasticity of supply ( $E_s$)= $\frac{\text{Percentage change in quantity supplied}}{\text{Percentage change in price}}$
$\frac{15}{15}=1$
Price elasticity of supply = 1.