At the market price of Rs 10, a firm supplies 4 units of output. The market price increases to Rs 20. The price elasticity of the firm’s supply is 1.25. What quantity will the firm supply at the new price?

10 units 9 units 8 units 6 units

9 units

Assume new quantity to be x. Applying formula of elasticity, (Change in quantity/Change in price)*( Initial price/Initial quantity) = Price elasticity of supply, we get 1.25 = (x-4/10)*(10/4). Solving this equation for x, we get x -9. So, 9 units of quantity will be supplied at the new price.