Price elasticity of supply of a good is 5 . A producer sells units 500 units of this good at Rs.5 per unit . How much will be willing to sell at Rs. 6 per unit ?
`E_(P)=(% "change in " Q_(d))/(% " change in P")`
`(-)2=(50%)/(% " change in P")`
`%` Change in P `=(50)/(-2)=-25%`
New `P=P+%` change in P
`=8+(-25% " change of " 8)...
`{:(" Price"," Demand"),(" " 7," "12),(" "6," "(72)/(6)=12):}`
`E_(P)=(P)/(Q)xx(DeltaQ)/(DeltaP)`
`=(7)/(12)xx(0)/(-1)=0`
The demand curve is parallel to the y- axis.
`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) ` of X `=(40)/(16)=2.5`
`therefore " "E_(s)` of Y =`2.5 div 2=1.25`
`E_(s)` of Y `=(%"change in supply")/(% "change in price")`
`1.25=(%"change in supply")/(8)`
% change in supply `=8xx1.25=10`...