Elasticity of supply is found to be equal to 2 quantity supplied happens to be increased by 20% in response to increase in price.find the new price when the initial price happen to rupees 20 per unit
Dear Student,
Given, Es = 2; P=20; △Q/Q=0.2
We know, Elasticity of supply (Es)= (△P△Q×(P/Q) or (△Q/Q) × (P/△P)
2 = 0.2 × 20/△P
2 = 4/△P
△P = 2
New Price = P+△P = 20+2 = 22
New price = Rs.22.
Regards
Given, Es = 2; P=20; △Q/Q=0.2
We know, Elasticity of supply (Es)= (△P△Q×(P/Q) or (△Q/Q) × (P/△P)
2 = 0.2 × 20/△P
2 = 4/△P
△P = 2
New Price = P+△P = 20+2 = 22
New price = Rs.22.
Regards