A firm earns a revenue of Rs. 50 when the market price of a good is Rs. 10. The market price increases to Rs. 15 and the firm now earns a revenue of Rs. 150. What is the price elasticity of the firm's supply curve?

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Solution

$\begin{matrix} Price & TR (Rs) & Supply (Units) 10 & 50 & 50 \div 10 = 5 15 & 150 & 150 \div 15 = 10 \end{matrix}$

$e_{s} = \frac{Δ q_{s}}{Δ p} . \frac{p}{q_{s}}$

$= \frac{5}{5} \times \frac{10}{5} = 2$

Thus $e_{s} > 1$

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A firm earns a revenue of Rs. 50 when the market price of a good is Rs. 10. The market price increases to Rs. 15 and the firm now earns a revenue of Rs. 150. What is the price elasticity of the firm's supply curve?

Price TR (Rs)Supply (Units)105050÷10=515150150÷15=10 es=ΔqsΔp.pqs =55×105=2 Thus es>1

$\begin{matrix} Price & TR (Rs) & Supply (Units) 10 & 50 & 50 \div 10 = 5 15 & 150 & 150 \div 15 = 10 \end{matrix}$

$e_{s} = \frac{Δ q_{s}}{Δ p} . \frac{p}{q_{s}}$

$= \frac{5}{5} \times \frac{10}{5} = 2$

Thus $e_{s} > 1$