Q11 of 30 Page 1

A producer supplies 80 units of a good at a price of Rs 10 per unit. Price elasticity of supply is 4. How much will he supply at Rs 9 per unit?

Q0 = 80 units


P0 = Rs. 10


Es = 4


P1 = Rs. 9


ΔP = P1- P0


ΔP = 9 – 10 = -1


ΔQ = Q1 – Q0


ΔQ = Q1 – 80


We know that,


ES = (ΔQ ∕ ΔP) × (P0 ∕ Q0)


4 = (Q1 – 80 ∕ -1) × 10 ∕ 80


4 = Q1 – 80 ∕ -8


-32 = Q1 – 80


Therefore,


Q1 = 48 units


Therefore, 48 units of a good are supplied by a producer at Rs 9 per unit.


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