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Home Questions HER65QPDZZ
Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Theory of Firms under Perfect Competition

Question:

What is the formula of Price elasticity of supply?

Options:

Change in Quantity/ Change in Price

(Change in Quantity/100) /(Change in Price/100)

Percentage change in quantity supplied /Percentage change in price

Both 2 and 3

Correct Answer:

Percentage change in quantity supplied /Percentage change in price

Explanation:

The correct answer is Option 3: Percentage change in quantity supplied /Percentage change in price

Price elasticity of supply, $e_s$ = Percentage change in quantity supplied /Percentage change in price

                                                      = [(△Q/Q)*100]/[(P/△P)*100]

                                                      = [△Q/Q] * [P/△P]
Why Option 2 is Incorrect?
It says:
(Change in Quantity/100) /(Change in Price/100)
On simplification we get - △Q/△P, which is simply the slope of the supply curve, not the elasticity — because elasticity requires percentage change, which involves dividing by the original values as well.

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