When price of a commodity falls from Rs. 12 per unit to Rs. 9 per unit, the producer supplies 75 per cent less output. Calculate price elasticity of supply.

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Solution

Given, percentage change in quantity supplied = (-)75%
$P = R s . 12; P_{1} = R s .9; Δ P = P_{1} - P = R s . 9 - R s . 12 = (-) R s . 3$
Percentage change in price = $\frac{Δ P}{P} \times \times 100$
$= \frac{- 3}{12} \times 100 = (-) 25$ %
Price elasticity of supply
$(E_{s}) = \frac{Percentage change in quantity supplied}{Percentage change in price}$ $= \frac{(-) 75}{(-) 25} = 3$
Price elasticity of supply = 3

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