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Question
A producer supplies 80 units of a good at a price of Rs 10 per unit. Price elasticity of supply is 4. How much will he supply at Rs 9 per unit?
Solution
Given that
Q0 = 80 units
P0 = Rs 10
Es = 4
P1 = Rs 9
ΔP = P1 - P0
ΔP = 9 - 10 = -1
ΔQ = Q1 - Q0
ΔQ = Q1 - 80
we know that
-32 = Q1 - 80
Therefore, Q1 = 48 units
48 units of a good will be supplied by a producer at Rs 9 per unit.
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