The market price of good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the initial and final output levels of the firm.

Given E_s = 0.5

Change in quantity = 15

Change in price = 15

Proportionate change in Price = 15/5 = 3

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