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| 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. |
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| Formula for elasticity of supply is percentage change in quantity supplied divided by 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. |
