Question

At the market price of Rs.10,a firm supplies 4 units of output.The market price increased to Rs.30.The price elasticity of the firm supply is 1.25.what quantity will the firm supply at the new price?

Answer 1

given
p = 10
q = 4
$$\begin{gathered} p^{\text{'}}=30 \\ \Delta p=p^{\text{'}}-p \\ =30-10=20{ \\ }_{E_s=1.25} \\ {E}_s=\frac{\Delta q}{\Delta p}*\frac{p}{q} \\ 1.25=\frac{\Delta q}{20}*\frac{10}{4} \\ \Delta q=\frac{1.25*20*4}{10} \\ \Delta q=10 \end{gathered}$$

$$\begin{gathered} newquantitysuppliedtomarket= \\ q+\Delta q \\ =4+10 \\ =14 \end{gathered}$$