The price elasticity of supply of a good is $4$ . When its price falls from Rs. 10 per unit to Rs. 8 per unit, its quantity supplied falls by 400 units. Calculate the new quantity at the reduced price.

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Solution

Givem $P = R s .10; P_{1} = R s .8;$
$Δ P = P_{1} - P = R s .8 - R s .10 = (-) R s .2$
$Δ Q = (-) 400 u n i t s; E_{s} = 4$
Price elasticity of supply $E_{s} = \frac{P}{Q} \times \frac{Δ Q}{Δ P}$
$4 = \frac{10}{Q} \times \frac{- 400}{- 2}$
$4 = \frac{2, 000}{Q}$
$Q = \frac{2, 000}{4} = 500$
new quantity $= 500 u n i t s - 400 u n i t s = 100 u n i t s$

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