SELECT * FROM question_mgmt as q WHERE id=5571 AND status=1 SELECT id,question_no,question,chapter FROM question_mgmt as q WHERE courseId=3 AND subId=60 AND chapterId=611 and ex_no='1' AND status=1 ORDER BY CAST(question_no AS UNSIGNED)

Question:

At the market price of Rs 10, a firm supplies 4 units of output. The market price increases to Rs 30. The price elasticity of the firm’s supply is 1.25. What quantity will the firm supply at the new price?

Answer:

Initial price, P1 = Rs 10

Initial output, Q1 = 4 units
Final price, P2 = Rs 30
∆P = P2 – P1
= Rs 30 – 10 = Rs 20

Elasticity of supply es = 1.25
es =
1.25 =
= 1.25 × 8 = ∆Q
= ∆Q = 10 units

Thus final output supplied, Q2 = ∆Q + Q1
Q2 = 10 + 4 = 14 units


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