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Home Questions HRV4B6AREZ
Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Theory of Firms under Perfect Competition

Question:

The price elasticity of supply of a commodity is 2.5. At a price of Rs.5 per unit, its quantity supplied is 300 units. What will be its quantity supplied at a price of Rs.4 per unit?

Options:

300 Units.

450 Units.

600 Units.

150 Units.

Correct Answer:

150 Units.

Explanation:

The correct answer is Option (4) → 150 Units.

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

                                                      = [(Q2- Q1/Q1)]/[(P1/P2 - P1)]                                                

We are given:

  • Price elasticity of supply (Es) = 2.5

  • Initial price (P₁) = Rs. 5

  • New price (P₂) = Rs. 4

  • Initial quantity supplied (Q₁) = 300 units

  • We need to find new quantity supplied (Q₂)

2.5 = [(Q2- 300/300)]/[(5/4-5)] 

2.5 =  [(Q2- 300/300)] /(-1/5)

2.5 = [(Q2- 300/300)] * -5

2.5 * 300 = - 5 (Q2- 300)

750/5 = - (Q2- 300)

-150 = Q2- 300

Q2= 300-150 = 150

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