Question

When the price of refrigerator rises from Rs.$2000$ per unit to Rs. $2500$ per unit and in response to this rise is price the quantity supplied increases from $2500$ units to $3500$ units, find out the price elasticity of supply.

• A. $4.5$
• B. $1.5$
• C. $3.5$
• D. $2$

Answer 1

The correct option is B $1.5$

$\Rightarrow$ Let $q_1=2500,q_2=3500,p_1=2000$ and $p_2=2500$.

$\Rightarrow$ $\Delta q=q_2-q_1=3500-2500=1000$

$\Rightarrow$ $\frac{q_2+q_1}{2}=\frac{3500+2500}{2}=3000$

$\Rightarrow$ $\Delta p=p_2-p_1=2500-2000=500$

$\Rightarrow$ $\frac{p_2+p_1}{2}=\frac{2500+2000}{2}=2250$

$\Rightarrow$ We know, $e_s=\frac{\Delta q}{\Delta p}\times \frac{p_2+p_1}{q_2+q_1}$

$\Rightarrow$ $e_s=\frac{1000}{3000}\times \frac{2250}{500}$

$\Rightarrow$ $e_s=\frac{1}{3}\times \frac{4.5}{1}=\frac{4.5}{3}=1.5$