A firm earns revenue of Rs 60 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns revenue of Rs 180. What is the price elasticity of the firm's supply curve?

1 0 0.5 2

2

Revenue Rs. 60 and price Rs. 10 means quantity is 6 units. And revenue Rs. 180 and price Rs 15 means quantity is 12 units. So at price 10, Q is 6 units and at price of Rs. 15, Q is 12 units. Applying formula for elasticity (Change in quantity/Change in price)*( Initial price/Initial quantity), we get elasticity as 2.