There are three identical firms in a market. The supply curve of each firm is q = 3p, where q is the quantity supplied and p is the price in rupees. What is the price elasticity of the market supply curve at a price of Rs 20?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 1
Given: three identical firms, each with q = 3p; price Rs 20.
Market supply is the sum of the firms’ supplies at each price:
Q = 3p + 3p + 3p = 9p
This is a straight line through the origin, so eS = 1 at every point.
Check at p = 20: Q = 180; eS = (ΔQ/ΔP) × (P/Q) = 9 × 20/180 = 1
Adding firms makes the line flatter but it still starts from the origin, so the elasticity stays 1.
NCERT (2026-27): “4.6 Market Supply Curve … Consider a market with n firms: firm 1, firm 2, firm 3, and so on. Suppose the market price is fixed at p. Then, the output produced by the n firms in aggregate is [supply of firm 1 at price p] + [supply of firm 2 at price p] + ... + [supply of firm n at price p]. In other words, the market supply at price p is the summation of the supplies of individual firms at that price.” “The Geometric Method … Now we come to panel (b). Here the supply curve goes through the origin. One can imagine that the point M has coincided with the origin here, i.e., Mq0 has become equal to Oq0. The price elasticity of this supply curve at the point S is given by the ratio, Oq0/Oq0 which is equal to 1. At any point on a straight line, supply curve going through the origin price elasticity will be one.” |