When price of a good rises from Rs 10 to Rs 12, the producer supplies 10 % more. Calculate price elasticity of supply.
Answer & explanation
Correct answer: option 1
The correct answer is Option 1: 0.5
Price elasticity of supply ($e_s$)= Percentage change in quantity supplied /Percentage change in price
Percentage change in quantity supplied = 10%
Change in Price = Rs 2
Percentage change in price = 2/10*100 = 20%
Price elasticity of supply ($e_s$) = 10%/20% = 0.5