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When price of a commodity becomes twice the original price, the quantity supplied increased by an amount equal to 4 times of original quantity supplied . Calculate the co-efficient of price elasticity of supply? (a) 2 (b) 1.5 (c) 3 (d) 4?
Most Upvoted Answer
When price of a commodity becomes twice the original price, the quanti...
1st case:
price = x and quantity = y
2nd case:
price = 2x and quantity = 4y
Difference of 1st and 2nd case
∆Price = ∆p = 2x - x = x
∆Quantity = ∆q = 4y - y = 3y
formula :
Ed= ∆q/q × p/∆p
=3y/y × x/x
=3 × 1 = 3
Therefore , the correct option will be (c)3.
price = x and quantity = y
2nd case:
price = 2x and quantity = 4y
Difference of 1st and 2nd case
∆Price = ∆p = 2x - x = x
∆Quantity = ∆q = 4y - y = 3y
formula :
Ed= ∆q/q × p/∆p
=3y/y × x/x
=3 × 1 = 3
Therefore , the correct option will be (c)3.
Community Answer
When price of a commodity becomes twice the original price, the quanti...
Solution:
Given,
Price elasticity of supply = ΔQs/ΔP × P/Qs
where, ΔQs = Change in quantity supplied
ΔP = Change in price
Let the original price be P and the original quantity supplied be Qs.
When the price of the commodity becomes twice the original price, the new price becomes 2P.
And, the quantity supplied increases by an amount equal to 4 times the original quantity supplied.
So, the new quantity supplied becomes 5Qs (original quantity supplied + 4 times the original quantity supplied).
ΔQs = 5Qs - Qs = 4Qs
ΔP = 2P - P = P
Now, substituting the values in the formula of price elasticity of supply, we get:
Price elasticity of supply = ΔQs/ΔP × P/Qs
= 4Qs/P × P/Qs
= 4
Therefore, the co-efficient of price elasticity of supply is 4.
Hence, the correct option is (d) 4.
Explanation:
The price elasticity of supply measures the responsiveness of quantity supplied to a change in price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. If the value of price elasticity of supply is greater than 1, it is said to be elastic, and if it is less than 1, it is said to be inelastic.
In this question, we are given that the price of the commodity becomes twice the original price, and the quantity supplied increases by an amount equal to 4 times the original quantity supplied. Using this information, we can calculate the co-efficient of price elasticity of supply as 4, which means that the supply is highly elastic. This means that a small change in price will lead to a proportionally greater change in quantity supplied.
Given,
Price elasticity of supply = ΔQs/ΔP × P/Qs
where, ΔQs = Change in quantity supplied
ΔP = Change in price
Let the original price be P and the original quantity supplied be Qs.
When the price of the commodity becomes twice the original price, the new price becomes 2P.
And, the quantity supplied increases by an amount equal to 4 times the original quantity supplied.
So, the new quantity supplied becomes 5Qs (original quantity supplied + 4 times the original quantity supplied).
ΔQs = 5Qs - Qs = 4Qs
ΔP = 2P - P = P
Now, substituting the values in the formula of price elasticity of supply, we get:
Price elasticity of supply = ΔQs/ΔP × P/Qs
= 4Qs/P × P/Qs
= 4
Therefore, the co-efficient of price elasticity of supply is 4.
Hence, the correct option is (d) 4.
Explanation:
The price elasticity of supply measures the responsiveness of quantity supplied to a change in price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. If the value of price elasticity of supply is greater than 1, it is said to be elastic, and if it is less than 1, it is said to be inelastic.
In this question, we are given that the price of the commodity becomes twice the original price, and the quantity supplied increases by an amount equal to 4 times the original quantity supplied. Using this information, we can calculate the co-efficient of price elasticity of supply as 4, which means that the supply is highly elastic. This means that a small change in price will lead to a proportionally greater change in quantity supplied.
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When price of a commodity becomes twice the original price, the quantity supplied increased by an amount equal to 4 times of original quantity supplied . Calculate the co-efficient of price elasticity of supply? (a) 2 (b) 1.5 (c) 3 (d) 4?
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When price of a commodity becomes twice the original price, the quantity supplied increased by an amount equal to 4 times of original quantity supplied . Calculate the co-efficient of price elasticity of supply? (a) 2 (b) 1.5 (c) 3 (d) 4? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about When price of a commodity becomes twice the original price, the quantity supplied increased by an amount equal to 4 times of original quantity supplied . Calculate the co-efficient of price elasticity of supply? (a) 2 (b) 1.5 (c) 3 (d) 4? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When price of a commodity becomes twice the original price, the quantity supplied increased by an amount equal to 4 times of original quantity supplied . Calculate the co-efficient of price elasticity of supply? (a) 2 (b) 1.5 (c) 3 (d) 4?.
When price of a commodity becomes twice the original price, the quantity supplied increased by an amount equal to 4 times of original quantity supplied . Calculate the co-efficient of price elasticity of supply? (a) 2 (b) 1.5 (c) 3 (d) 4? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about When price of a commodity becomes twice the original price, the quantity supplied increased by an amount equal to 4 times of original quantity supplied . Calculate the co-efficient of price elasticity of supply? (a) 2 (b) 1.5 (c) 3 (d) 4? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When price of a commodity becomes twice the original price, the quantity supplied increased by an amount equal to 4 times of original quantity supplied . Calculate the co-efficient of price elasticity of supply? (a) 2 (b) 1.5 (c) 3 (d) 4?.
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