A company supplies 20 units of a particular product per month, at a price of ₹ 10 per unit. If price…
When price increases from ₹ 10 to ₹ 15, the percentage change in price is (15 - 10) / 10 = 50%. Given a price elasticity of supply (Es) of 5, the percentage increase in…
Choose your answer
A company supplies 20 units of a particular product per month, at a price of ₹ 10 per unit. If price elasticity of supply is 5, how many units would the company supply at a price of ₹ 15 ?
Answer and explanation
Correct answer B
When price increases from ₹ 10 to ₹ 15, the percentage change in price is (15 - 10) / 10 = 50%. Given a price elasticity of supply (Es) of 5, the percentage increase in quantity supplied is 5 × 50% = 250%, which equals an increase of 2.5 × 20 = 50 units; hence, the new quantity supplied at ₹ 15 is 20 + 50 = 70 units.
Practice for these exams
-
UGC NET Management