Suppose the market for footballs is perfectly competitive. When the price of a football is Rs10, let us assume that 200 footballs are produced in aggregate by the firms in the market. When the price of a football rises to Rs 30, 1,000 cricket balls are produced in aggregate by the firms. Compute price elasticity of supply.

2

The correct answer is Option 2: 2

Formula for elasticity of supply = percentage change in quantity supplied /percentage change in price of the commodity.

Percentage change in quantity supplied is [(1000-200)/200]*100 = 400.

And percentage change in price is [(30-10)/10]*100 = 200.

So price elasticity of supply will be 400/200 = 2.