A straight-line supply curve, when extended, cuts the quantity axis at 20 units. At a point S on the curve, the quantity supplied is 60 units. Using the geometric method, the price elasticity of supply at S is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 2/3
By the geometric method, eS at S = Mq0/Oq0, where M is where the line cuts the quantity axis.
Given:
OM = 20 units
Oq0 = 60 units
Mq0 = 60 − 20 = 40 units
eS = 40/60 = 2/3
The line cuts the quantity axis in its positive range, so eS is less than 1.
NCERT (2026-27): “The Geometric Method … In panel (c) we consider a straight line supply curve and S is a point on it. It cuts the quantity-axis at M which is at its positive range. Again the price elasticity of this supply curve at the point S is given by the ratio, Mq0/Oq0. Now, Mq0 < Oq0 and hence, eS < 1. S can be any point on the supply curve, and therefore at all points on such a supply curve eS < 1.”
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