A fall in the price of a firm's product results in a fall in its supply by 40 per cent. Its price elasticity of supply is 1.6. Calculate the percentage fall in its price.

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Solution

Given, $E_{s} = 1.6$
Percentage change in quantity supplied= -40%
Price elasticity of supply
$(E_{s}) = \frac{Percentage charge in quantity supplied}{Percentage change in price}$
$1.6 = \frac{- 40}{Percentage change in price}$
Percentage change in price = $\frac{- 40}{1.6}$
Percentage change in price = -25%
Percentage fall in price = 25%

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A fall in the price of a firm's product results in a fall in its supply by 40 per cent. Its price elasticity of supply is 1.6. Calculate the percentage fall in its price.

Given, Es=1.6 Percentage change in quantity supplied= -40% Price elasticity of supply (Es)=Percentage charge in quantity suppliedPercentage change in price 1.6=−40Percentage change in price Percentage change in price = −401.6 Percentage change in price = -25% Percentage fall in price = 25%