When the price of a cricket ball is Rs. 10, let us assume that 200 cricket balls are produced in aggregate by the firms in the market. When the price of a cricket ball rises to Rs. 30, let us assume that 1,000 cricket balls are produced in aggregate by the firms in the market. Calculate the elasticity of supply.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 2
We are given:
Initial price (P₁) = ₹10
New price (P₂) = ₹30
Initial quantity supplied (Q₁) = 200
New quantity supplied (Q₂) = 1000
Elasticity of Supply ($E_s$) :Percentage change in quantity supplied / Percentage change in Price
Percentage change in quantity supplied = ($Q_2$- $Q_1$)/ $Q_1$ = 800/200 = 4
Percentage change in price = ($P_2$- $P_1$)/ $P_1$ = 20/ 10 =2
Elasticity of Supply ($E_s$) =4/2 = 2