Question

At the market price of ₹10, a firm supplies 4 units of orange. The market price rises to ₹30. The price elasticity of the firm’s supply is 1.25. What quantity will the firm supply at the new price?

Answer 1

In the given example, P = 10 Q = 4 P1 = 30 es = 1.25 

ΔP = 30-10 = 20 

Applying these values in the formula, we get,

e_s =\(\frac{\Delta Q}{\Delta P} \times \frac{P}{Q}\)

e_s = \(\frac{\Delta Q}{\Delta P} \times \frac{P}{Q}\)

1.25 = \(\frac{\Delta Q}{\Delta 20} \times \frac{10}{4} = \frac{\Delta Q}{8}\)

\(\Delta Q\) = 1.25 \(\times\) 8 = 10