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Question
When the price of a good rises from Rs 20 per unit to Rs 30 per unit, the revenue of the firm producing this good rises from Rs 100 to Rs 300. Calculate the price elasticity of supply.
Solution
Given that
P1 = 20
P2 = 30
ΔP = 30 - 20 =10
Now
TR1 = 100
TR2 = 300
Q1 = TR1/P1 = 100/20 = 5
Q2 = TR2/P2 = 300/30 = 10
Thus
`DeltaQ=(10-5)=5`
`E_d((DeltaQ)/Qxx100)/((DeltaP)/Pxx100)=(5/5)/(10/20)1/(1/2)=2`
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