The market price of a good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the final output levels of the firm.

10 units

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15 units

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20 units

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25 units

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Solution

The correct option is D
25 units

Given that
$p_{0} = R s 5, p_{1} = R s 20, Δ q = 15, ϵ_{s} = 0.5 Δ p = p_{1} - p_{0} = R s 15$

$ϵ_{s} = \frac{Δ q}{Δ p} \times \frac{p_{0}}{q_{0}} ϵ_{s} = \frac{15}{15} \times \frac{5}{q_{0}} = 0.5 q_{0} = \frac{5}{0.5} = 10 q_{1} = q_{0} + 15 = 25$

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The market price of a good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the final output levels of the firm.

The correct option is D 25 units Given that p0=Rs 5, p1=Rs 20,Δq=15, ϵs=0.5Δp=p1−p0=Rs 15 ϵs=ΔqΔp×p0q0ϵs=1515×5q0=0.5q0=50.5=10q1=q0+15=25

The correct option is D
25 units

Given that
$p_{0} = R s 5, p_{1} = R s 20, Δ q = 15, ϵ_{s} = 0.5 Δ p = p_{1} - p_{0} = R s 15$

$ϵ_{s} = \frac{Δ q}{Δ p} \times \frac{p_{0}}{q_{0}} ϵ_{s} = \frac{15}{15} \times \frac{5}{q_{0}} = 0.5 q_{0} = \frac{5}{0.5} = 10 q_{1} = q_{0} + 15 = 25$