Question

A producer supplies 80 units of a good at a price of Rs. 10 per unit. Price elasticity of supply is 4. How much will he supply at Rs. 9 per unit?

Answer 1

Suppose the producer supplies M units at Rs. 9.
Given, P= Rs. 10; $P_1=Rs.9$
$\Delta P=P_1-P=Rs.9-Rs.10=(-)Rs.1$
Q = 80 units; $Q_1=Munits$
$\Delta Q=Q_1-Q=(M-80)$ units
Price elasticity of supply $\left(E_1\right)=\frac{P}{Q}\times \frac{\Delta Q}{\Delta P}$
$4=\frac{10}{80}\times \frac{M-80}{-1}$
$\Rightarrow 4=\frac{M-80}{-8}$
$\Rightarrow -32=M-80$
$\Rightarrow M=80-32=48$
The producer will supply 48 units.