Advertisements
Advertisements
Question
How is elasticity of supply measured according to percentage method?
Solution
Percentage Method:
According to percentage method, elasticity of supply (Es) is the ratio between percentage change in quantity supplied and percentage change in price of the commodity. In fact, this method originated from the definition of price elasticity of supply itself.
Price elasticity of supply = `("Percentage change in quantity supplied")/("Percentage change in its Price")`
Percentage Change in quantity supplied = `(ΔQ)/Qxx100`
Percentage change in price = `(ΔP)/Pxx100`
Now the percentage formula can be written as
Es= `((ΔQ)/Qxx100)/((ΔP)/Pxx100)`
Cancelling out 100 by 100, we get
Es = `((ΔQ)/Q)/((ΔP)/P)`
When Q = initial quantity
P Initial price
ΔQ = Change in quantity supplied
ΔP = Change in price of the commodity
APPEARS IN
RELATED QUESTIONS
Draw a perfectly inelastic supply curve.
A 10 per cent increase in price of a good causes 5 per cent increase in its quantity supplied, elasticity of supply will be ______.
When price of a·product rises by 10% its quantity supplied also rises by 10%. Find out price elasticity.
Which of the following measures of price elasticity shows elasticity shows elastic supply?
If price elasticity of supply is greater than 1, then supply is said be elastic.
Choose the correct term for the given definition.
The ratio between the percentage change in supply to a percentage change in price.
When the price increases by 50% and the supply increases only by 5% the price elasticity of supply of that commodity will be ______.
Pick the option which does not belong to the group.
Assertion (A): In case of perfectly inelastic supply, supply curve is a vertical straight line supply curve.
Reason (R): Supply does not change with change in price in case of Es = 0.
Which of the following measures of price elasticity shows inelastic supply?
Draw a straight line supply showing elasticity greater than one.
The coefficient of elasticity of a commodity is 0.4. What percentage change in supply will take place if its price rises 20%?
The quantity of a commodity supplied increases by 25% when its price rises by 10%. Calculate price elasticity of supply.
Draw and briefly explain a perfectly elastic supply curve.
If the price of a commodity increases by 50% and its supply increases by 25% then calculate the price elasticity of supply following the percentage method. Identify the degree of price elasticity.
Explain any four determinants of elasticity of supply.
Identify and define the degree of price elasticity of supply from the diagram for the supply curves S1, S2, S3, S4.
If the price of a commodity falls by 10% and consequently, the quantity supplied decreases by 20%, what will be its elasticity of supply?
When is supply of a good unitary elastic?
Draw relatively elastic supply.
