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The ratio of price elasticity of supply of a commodity A and B is 1:1.5. 20% fall in price of A results in a 40% fall in its supply. Calculate the % increase in supply of B if its price rises from Rs.10 to Rs.11.?
Most Upvoted Answer
The ratio of price elasticity of supply of a commodity A and B is 1:1....
Solution:
Given:
Price elasticity of supply of A and B = 1:1.5
Percentage fall in price of A = 20%
Resultant fall in supply of A = 40%
Initial price of B = Rs.10
Final price of B = Rs.11
To find:
The percentage increase in supply of B
Calculations:
Let's assume that the initial supply of A is 100 units.
As per the given information, a 20% fall in the price of A leads to a 40% fall in its supply.
Therefore, the new price of A = 0.8 * initial price of A = 0.8 * P
And the new supply of A = 0.6 * initial supply of A = 0.6 * 100 = 60 units
Now, we know that the ratio of price elasticity of supply of A and B is 1:1.5
Let's assume that the price elasticity of supply of A is x and the price elasticity of supply of B is 1.5x.
Hence, we can write:
Elasticity of supply of A / Elasticity of supply of B = 1/1.5
x / 1.5x = 1/1.5
x = 2.25x/3
x = 0.75x
Therefore, the price elasticity of supply of A is 0.75 and the price elasticity of supply of B is 1.5 * 0.75 = 1.125
Now, we can use the formula of price elasticity of supply to find the percentage increase in supply of B:
% change in quantity supplied of B = Price elasticity of supply of B * % change in price
where % change in price = (final price - initial price) / initial price * 100
= (11-10) / 10 * 100 = 10%
% change in quantity supplied of B = 1.125 * 10
= 11.25%
Therefore, the percentage increase in supply of B is 11.25%.
Conclusion:
The percentage increase in supply of B if its price rises from Rs.10 to Rs.11 is 11.25%.
Given:
Price elasticity of supply of A and B = 1:1.5
Percentage fall in price of A = 20%
Resultant fall in supply of A = 40%
Initial price of B = Rs.10
Final price of B = Rs.11
To find:
The percentage increase in supply of B
Calculations:
Let's assume that the initial supply of A is 100 units.
As per the given information, a 20% fall in the price of A leads to a 40% fall in its supply.
Therefore, the new price of A = 0.8 * initial price of A = 0.8 * P
And the new supply of A = 0.6 * initial supply of A = 0.6 * 100 = 60 units
Now, we know that the ratio of price elasticity of supply of A and B is 1:1.5
Let's assume that the price elasticity of supply of A is x and the price elasticity of supply of B is 1.5x.
Hence, we can write:
Elasticity of supply of A / Elasticity of supply of B = 1/1.5
x / 1.5x = 1/1.5
x = 2.25x/3
x = 0.75x
Therefore, the price elasticity of supply of A is 0.75 and the price elasticity of supply of B is 1.5 * 0.75 = 1.125
Now, we can use the formula of price elasticity of supply to find the percentage increase in supply of B:
% change in quantity supplied of B = Price elasticity of supply of B * % change in price
where % change in price = (final price - initial price) / initial price * 100
= (11-10) / 10 * 100 = 10%
% change in quantity supplied of B = 1.125 * 10
= 11.25%
Therefore, the percentage increase in supply of B is 11.25%.
Conclusion:
The percentage increase in supply of B if its price rises from Rs.10 to Rs.11 is 11.25%.
Community Answer
The ratio of price elasticity of supply of a commodity A and B is 1:1....
For A,
Fall in price = 20%
Fall in supply = 40%
Change in supply is twice the change in price.
Elasticity of A = 2
The ratio is given as 1:1.5
multiply the ratio by 2 so that elasticity of A matches with first place of ratio.
New ratio after multiplied by 2= 2:3
therefore elasticity of B=3
For b ,
change in price = 11-10=1
% change in price = 10%
therefore
% change in quantity supplied= elasticity × %change in price = 3×10 = 30%
Fall in price = 20%
Fall in supply = 40%
Change in supply is twice the change in price.
Elasticity of A = 2
The ratio is given as 1:1.5
multiply the ratio by 2 so that elasticity of A matches with first place of ratio.
New ratio after multiplied by 2= 2:3
therefore elasticity of B=3
For b ,
change in price = 11-10=1
% change in price = 10%
therefore
% change in quantity supplied= elasticity × %change in price = 3×10 = 30%
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The ratio of price elasticity of supply of a commodity A and B is 1:1.5. 20% fall in price of A results in a 40% fall in its supply. Calculate the % increase in supply of B if its price rises from Rs.10 to Rs.11.?
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The ratio of price elasticity of supply of a commodity A and B is 1:1.5. 20% fall in price of A results in a 40% fall in its supply. Calculate the % increase in supply of B if its price rises from Rs.10 to Rs.11.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about The ratio of price elasticity of supply of a commodity A and B is 1:1.5. 20% fall in price of A results in a 40% fall in its supply. Calculate the % increase in supply of B if its price rises from Rs.10 to Rs.11.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The ratio of price elasticity of supply of a commodity A and B is 1:1.5. 20% fall in price of A results in a 40% fall in its supply. Calculate the % increase in supply of B if its price rises from Rs.10 to Rs.11.?.
The ratio of price elasticity of supply of a commodity A and B is 1:1.5. 20% fall in price of A results in a 40% fall in its supply. Calculate the % increase in supply of B if its price rises from Rs.10 to Rs.11.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about The ratio of price elasticity of supply of a commodity A and B is 1:1.5. 20% fall in price of A results in a 40% fall in its supply. Calculate the % increase in supply of B if its price rises from Rs.10 to Rs.11.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The ratio of price elasticity of supply of a commodity A and B is 1:1.5. 20% fall in price of A results in a 40% fall in its supply. Calculate the % increase in supply of B if its price rises from Rs.10 to Rs.11.?.
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