A firm supplies 10 units of a good at a price of Rs 5 per units. Price elasticity of supply is 1.25. What quantity will the firm supply at a price of

Question

A firm supplies 10 units of a good at a price of Rs 5 per units. Price elasticity of supply is 1.25. What quantity will the firm supply at a price of

A firm supplies 10 units of a good at a price of Rs 5 per units. Price elasticity of supply is 1.25. What quantity will the firm supply at a price of Rs 7 per units ?

Monjur Alahi

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2025-01-04 04:42

1 Answers

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Salim Ahmed Kawsar · Accepted Answer · 2023-02-05T15:29:48+06:00

As given in the question,
`Q^(s) = 10, P = 5 and E^(s) = 1.25`
At new price of Rs 7 per unit
`Delta P = 7 - 5 = 2`
We know,
`E_(s) = (Delta Q)/(Delta P) xx (P)/(Q)`
or, `1.25 = (DeltaQ)/(2) xx (5)/(10)`
or, `Q = 1.25 xx 4 = 5`
Thus, the new quantity that the firm would supply at a price of Rs 7 per units is 15 (5 + 10).