Question

When price of a good rises from $Rs.10$ to $Rs.12$ per unit, the producer supplies $10$ per cent more. Calculate price elasticity of supply.

Answer 1

Given, percentage change in quantity supplied $=10\%$
$P=Rs.10;P_1=Rs.12;△P=P_1-P=Rs.12-Rs.10=Rs.2$
Percentage change in price $=\frac{△P}{P}\times 100$
$=\frac{2}{10}\times 100=20\%$
Price elasticity of supply $\left(E_S\right)=\frac{\text{Percentage change in quantity supplied}}{\text{Percentage change in price}}$
$=\frac{10\%}{20\%}=0.5$
Price elasticity of supply $=0.5$.