At Rs.12/unit, quantity supplied of a commodity is 500 units. When its price riese to Rs.15/unit, its quantity supplied rises to 650 units. Calculate price elasticity of supply. Is supply elastic ?
`{:(" P 12"),(" P"_(1)" 15"),(ulbar(DeltaP" 3")):}" "{:("Q 500"),("Q"_(1)" 650"),(ulbar(DeltaQ" 150")):}" "P.e_(S)=(P)/(Q)xx(DeltaQ)/(DeltaP)=(12)/(500)xx(150)/(3)=1.2`
Yes, supply is elastic as it is greater than one.
`E_(P)=(P)/(Q)xx(DeltaQ)/(DeltaP)=(50)/(1000)xx(80)/(-5)=(-)(4)/(5)=(-)0.8`
The demand is inelastic because the absolute value of clasticity is less than 1 (sign ignored).
`E_(s)=(P)/(Q_(s))xx(DeltaQ_(s))/(DeltaP)`
`1.5=(8)/(200)xx(DeltaQ_(s))/(2)`
`8DeltaQ_(s)=600`
`DeltaQ_(s)=75`
New `Q=Q_(s)+DeltaQ_(s)=200+75=275` units
`E_(s)=(P)/(Q_(s))xx(DeltaQ_(s))/(DeltaP)`
`2.5=(5)/(300)xx(DeltaQ_(s))/(-1)`
`-750=5DeltaQ_(s)`
`DeltaQ_(s)=-150`
New `Q=Q_(s)+ DeltaQ=300+(-150)=300-150=150` units