The price elasticity of supply of a good is 0.8. Its price rises by 50 per cent. Calculate the percentage increase in its supply.

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Solution

Given, $E_{s} = 0.8$
Percentage change in price = 50%
Price elasticity of supply
$E_{s} = \frac{Percentage change in quantity supplied}{Percentage change in price}$
$0.8 = \frac{Percentage change in quantity supplied}{50}$
Percentage change in quantity supplied = $0.8 \times 50$
Percentage change in quantity supplied = 40%

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