Question

Elasticity of supply is found to be $=2$. Quantity supplied happens to increase by $20$ per cent in response to increase in price. Find the new price when the initial price happens to be $Rs.20$ per unit.

Answer 1

Given, $E_S=2;P=20;\frac{△Q}{Q}=0.2$
We know, Elasticity of supply $\left(E_S\right)=\frac{△P}{△Q}\times \frac{P}{Q}$ or $\frac{△Q}{Q}\times \frac{P}{△P}$
$2=0.2\times \frac{20}{△P}\Rightarrow 2=\frac{4}{△P}$
$△P=\frac{4}{2}=2$
$P_1=P+△P=20+2=22$
New price $=Rs.22$.