Question

The supply of a commodity at a price of Rs 20 per unit is 500 units. A 10 per cent rise in its price results in a 15 per cent rise in its supply. Calculate its price elasticity of supply. Is its supply elastic?

Answer 1

% rise in price = 10%

% rise in supply = 15%

$e_s=\frac{\text{\% rise in supply}}{\text{\% rise in price}}=\frac{15}{10}=1.5$

Since, $e_s>1$(i.e., 1.5), the supply of a commodity is elastic.