Question

When the price of a doll is $\text{Rs.}4$ per doll, a doll maker supplies $8$ dolls per day. If the price rises to $\text{Rs.}5$ per doll, he is willing to supply $10$ dolls per day. Calculate the price elasticity of supply of dolls.

Answer 1

Price elasticity of supply $\left(E_S\right)=\frac{P}{Q}\times \frac{△Q}{△P}$,

where $P$ is the price,

$\Delta P$ is the change in price,

$Q$ is the number of items,

$\Delta Q$ is the change in the number of products
$P_i=\text{Rs.}4$

$P_f=\text{Rs.}5$

$\Delta P=P_f-P_i=\text{Rs.}(5-4)=\text{Rs.}1$

$Q_i=8\text{dolls}$

$Q_f=10\text{dolls}$

$\Delta Q=Q_f-Q_i=(10-8)\text{dolls}=2\text{dolls}$
Price elasticity of supply $\left(E_S\right)=\frac{4}{8}\times \frac{2}{1}=1$
The price elasticity of supply is equal to unity.