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Question
When price of a commodity falls from Rs 12 per unit to Rs 9 per unit, the producer supplies 75 percent less output. Calculate price elasticity of supply.
Solution
Given that
P0 = Rs 12, P = Rs 9
Percentage change in quantity supplied =(-)75%
Change in price (ΔP)= P1 - P0
= 9-12
= (-3)
Percentage change in price = (ΔP/P0) x 100
= (-3)/12 x 100
= -25%
`"Price elasticity of supply" (E_s)="Percentage change in quantity supplied"/"Percentage change in price"`
`=(-75%)/(-25%)=3`
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