Question

a firm supplies 10 units of a good at a price of 5 per unit price elasticity of supply is1.25 what quantity will the firm supply at a price of rs 7 per unit

Answer 1

Dear Student,

Information given in the question:

Initial Price (P₀) = Rs 5 per unit
Final Price (P₁) = Rs 7 per unit
Initial Quantity demanded (Q₀) = 10 units
Price Elasticity of Supply = 1.25

$$\begin{gathered} \mathrm{Elasticity}\mathrm{of}\mathrm{Supply}=\frac{\mathrm{Change}\mathrm{in}\mathrm{Quantity}\mathrm{Demanded}}{\mathrm{Change}\mathrm{in}\mathrm{Price}}\times \frac{\mathrm{P}}{\mathrm{Q}} \\ 1.25=\frac{Q_{\mathit{1}}-10}{7-5}\times \frac{5}{10} \\ 1.25=\frac{Q_{\mathit{1}}-10}{2}\times \frac{5}{10} \\ \mathrm{Solving}\mathrm{this}\mathrm{equation}, \\ 1.25=\frac{Q_{\mathit{1}}-10}{4} \\ \mathit{}\mathit{}{Q}_{\mathit{1}}-10=6 \\ {Q}_{\mathit{1}}=16\mathrm{units} \\ \mathrm{Thus},\mathrm{Quantity}\mathrm{Demanded}=16\mathrm{units} \end{gathered}$$