Answer to Question #185425 in Management for Akansha

Question

3. a. Define elasticity of supply and find the price from the given statement:

If Es of a good is 2 and a firm supplies 200 units at price of Rs 8 per unit, then at what price will the firm supply 250 units. (5 Marks) 

Answer 1

Solution.

Price elasticity is defined as the measure of responsiveness to the supply of a good or service after a change in its market.

From the given statements, the firm will supply the goods at the price of P=8+1, which will be,

R.s =9 per unit.