Along a firm’s straight-line supply curve, the quantity supplied rises by 4 units for every Rs 1 rise in price. At a price of Rs 10, the firm supplies 50 units. What is the price elasticity of supply at this point?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 0.8
Given: ΔQ/ΔP = 4 units per rupee; P = Rs 10; Q = 50 units.
eS = (percentage change in Q) ÷ (percentage change in P) = (ΔQ/ΔP) × (P/Q)
eS = 4 × (10/50)
eS = 4 × 0.2 = 0.8
The slope 4 alone is not the elasticity; it must be multiplied by P/Q.
NCERT (2026-27): “4.7 Price Elasticity of Supply The price elasticity of supply of a good measures the responsiveness of quantity supplied to changes in the price of the good. … When the supply curve is vertical, supply is completely insensitive to price and the elasticity of supply is zero. In other cases, when supply curve is positively sloped, with a rise in price, supply rises and hence, the elasticity of supply is positive.” “Summary … The price elasticity of supply of a good is the percentage change in quantity supplied due to one per cent change in the market price of the good.” |