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Question
When price of a·product rises by 10% its quantity supplied also rises by 10%. Find out price elasticity.
Options
Zero
Infinity
1
10
Solution
1
Explanation:
Price Elasticity of Supply (Es) is calculated using the formula:
Elasticity of Supply (Es) = `("Percentage change in quantity supplied")/("Percentage change in price")`
Es = `(10%)/(10%) =1`
An elasticity of 1 indicates unitary elasticity, where the percentage change in quantity supplied is exactly equal to the percentage change in price.
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