Question

Total revenue of a firm rises from Rs. 50 to Rs. 100 when the price of its product rises from Rs. 5 per unit to Rs. 10 per unit. Calculate the price elasticity of supply.

Answer 1

Given $P=Rs.5;P_1=Rs.10;$

$\Delta P=P_1-P=Rs.10-Rs.5=Rs.5$
When price $=Rs.5$, total revenue $(P\times Q)=Rs.50$
Quantity supplied $Q=\frac{50}{5}=10units$
When price $=Rs.10$, total revenue $(P_1\times Q_1)=Rs.100$
New quantity supplied $Q_1=\frac{100}{10}=10units$
$Q=10units;Q_1=10units;$

$\Delta Q=Q_1-Q=(10-10)=0units$
Price elasticity of supply $E_s=\frac{P}{Q}\times \frac{\Delta Q}{\Delta P}=\frac{5}{10}\times \frac{0}{5}=0$
Price elasticity of supply $=0$ (zero)