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Question
A producer supplies 100 units of a good at a price of Rs 20 per unit. Price elasticity of supply is 2. At what price will he supply 50 units? Calculate
Solution
Given that
Q0 = 100 units
P0 = Rs 20
P1 =Rs 10
Q1 = 50 units
As we know that
`E_s=(DeltaQ)/(DeltaP)xxP_0/Q_0`
ΔP = P1-P0
ΔP =P1-20
ΔQ=Q1-Q0
ΔQ= 50 - 100= - 50 units
`2=(-50)/(P_1-20)xx20/100`
P1=Rs 15
Therefore,at aprice of Rs15, the Producer will supply 50 units.
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