When price of a good falls from Rs. 20 to Rs. 10 per unit, the producer reduces supply from 100 units to 50 units. Calculate price elasticity of supply.

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Solution

Given, P= Rs. 20, $P_{1} = R s . 10$ ;
$Δ = P_{1} - P = R s . 10 - R s . 20 = (-) R s . 10$
Q= 100 units;
$Q_{1} = 50 u n i t s$ ;
$Δ Q = Q_{1} - Q = (50 - 100) u n i t s = (-) 50 u n i t s$
Price elasticity of supply,
$(E_{s}) = \frac{P}{Q} \times \frac{Δ Q}{Δ P} = \frac{20}{100} \times \frac{- 50}{- 10} = 1$
Price elasticity of supply =1.

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When price of a good falls from Rs. 20 to Rs. 10 per unit, the producer reduces supply from 100 units to 50 units. Calculate price elasticity of supply.

Given, P= Rs. 20, P1=Rs.10; Δ=P1−P=Rs.10−Rs.20=(−)Rs.10 Q= 100 units; Q1=50units; ΔQ=Q1−Q=(50−100)units=(−)50units Price elasticity of supply, (Es)=PQ×ΔQΔP=20100×−50−10=1 Price elasticity of supply =1.