A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve?



Price



10



15



Supply



5



10



Revenue



50



150




Supply = Revenue / Price


Change in quantity = 5


Change in price = 5


Proportionate change in Price = 5/10 = 0.5


Proportionate change in Quantity Supplied = 5/5 = 1




= 2


Proportionate Change in Quantity Supplied = 0.5 X 3 = 1.5


Proportionate change in Quantity Supplied = 15/x = 1.5


x = 15 / 1.5 = 10


Supply at base price of Rs 5 = 10


Change in quantity = 15


Therefore, new supply at the price of 20 will be = 10 + 15 = 25


25
1