If price of a commodity rises from Rs. 10 to Rs. 15, its supply increases by 20%. Calculate the price elasticity of supply for this commodity.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 0.4
Given:
Old price = Rs. 10
New price = Rs. 15
Increase in supply = 20%
Price elasticity of supply (eS) is the percentage change in quantity supplied divided by the percentage change in price. The change in price is taken on the old price:
Percentage change in price = \( \displaystyle \frac{15 - 10}{10} \times 100 \) = 50 per cent
eS = 20 ÷ 50 = 0.4
NCERT (2026-27): Introductory Microeconomics — Chapter 4: The Theory of the Firm under Perfect Competition
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