Question

A seller sells 80 Kgs of potatoes a day when the price of potatoes is Rs. 4 per kilogram. The price elasticity of supply of potatoes is known to be 2, how much quantity of potatoes will the seller supply when the price rises to Rs. 5 per Kgs.

Answer 1

e_s = P / S x ∆ s / ∆ p 

2 = 4 / 80 x ∆ s /1 

2 = 4∆ s / 80 

4∆ s = 80 x 2 

4 ∆ s = 160 

∆ s = 160 / 4 = 40

Total supply by the seller at price of Rs. 5 = S + ∆S = 80 + 40 = 120 Kgs