A firm’s straight-line supply curve is q = 3p − 15, where q is the quantity supplied and p is the price in rupees. Using the geometric method, what is the price elasticity of supply at the point where p = 10?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 2
Given: q = 3p − 15; the point S is at p = 10.
By the geometric method, eS at S = Mq0/Oq0, where M is the point where the line, extended, cuts the quantity axis.
At p = 10: q0 = 3 × 10 − 15 = 15, so Oq0 = 15
At p = 0: q = −15, so M lies at −15, in the negative range
Mq0 = 15 − (−15) = 30
eS = 30/15 = 2
As expected, a line that cuts the price axis at a positive value has eS greater than 1.
NCERT (2026-27): “The Geometric Method Consider the Figure 4.14. Panel (a) shows a straight line supply curve. S is a point on the supply curve. It cuts the price-axis at its positive range and as we extend the straight line, it cuts the quantity-axis at M which is at its negative range. The price elasticity of this supply curve at the point S is given by the ratio, Mq0/Oq0. For any point S on such a supply curve, we see that Mq0 > Oq0. The elasticity at any point on such a supply curve, therefore, will be greater than 1.” |