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The supply function is given as Q= -100 10P. Find the elasticity using point method, when price is Rs.15?
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The supply function is given as Q= -100 10P. Find the elasticity usi...
Solution:

Given supply function: Q = -100 + 10P

Price when elasticity needs to be calculated: P = Rs. 15

To calculate elasticity using the point method, we need to follow the below steps:

Step 1: Calculate the derivative of the supply function with respect to price

dQ/dP = 10

Step 2: Calculate the slope of the supply curve at the price of interest

Slope of the supply curve at P = Rs. 15 is given by the derivative of the supply function at P = Rs. 15.

dQ/dP at P = Rs. 15 = 10

Step 3: Calculate the price-quantity combination at the point of interest

At P = Rs. 15, Q = -100 + 10P = -100 + 10(15) = 50

So, the price-quantity combination at the point of interest is (15, 50).

Step 4: Calculate elasticity using the formula

Elasticity at P = Rs. 15 = (P/Q) x (dQ/dP)

Substituting the values, we get:

Elasticity at P = Rs. 15 = (15/50) x 10 = 3

Therefore, the elasticity at P = Rs. 15 is 3.

Explanation:

- Elasticity is a measure of the responsiveness of quantity demanded or supplied to a change in price.
- The point method is one of the methods used to calculate elasticity, where elasticity is calculated at a specific point on the demand or supply curve.
- In this problem, we need to calculate the elasticity of supply at a price of Rs. 15 using the point method.
- To calculate elasticity using the point method, we need to calculate the derivative of the supply function with respect to price, calculate the slope of the supply curve at the price of interest, calculate the price-quantity combination at the point of interest, and then use the formula to calculate elasticity.
- The elasticity of supply is calculated to be 3, which means that a 1% increase in price will result in a 3% increase in quantity supplied, and vice versa. This suggests that the supply is relatively elastic at this price level.
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The supply function is given as Q= -100 10P. Find the elasticity usi...
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The supply function is given as Q= -100 10P. Find the elasticity using point method, when price is Rs.15?
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