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The supply function is given as Q=-100 10P.Find the elasticity using point method when price is 15?
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The supply function is given as Q=-100 10P.Find the elasticity using p...
Elasticity Calculation using Point Method
Given Information:
- Supply Function: Q = -100 + 10P
- Price: P = 15
Calculating Elasticity:
The formula for price elasticity of supply using point method is:
Elasticity = (Percentage change in quantity supplied / Percentage change in price)
Step 1: Calculate Initial Quantity Supplied
Using the supply function, we can calculate the initial quantity supplied at price P=15:
Q = -100 + 10P
Q = -100 + 10(15)
Q = -100 + 150
Q = 50
Step 2: Calculate New Quantity Supplied
To calculate the new quantity supplied, we need to change the price by a small amount. Let's assume the new price is P=16:
Q = -100 + 10P
Q = -100 + 10(16)
Q = -100 + 160
Q = 60
Step 3: Calculate Percentage Change in Quantity Supplied
The percentage change in quantity supplied is:
Percentage change in quantity supplied = ((New Quantity Supplied - Initial Quantity Supplied) / Initial Quantity Supplied) x 100
Percentage change in quantity supplied = ((60 - 50) / 50) x 100
Percentage change in quantity supplied = 20%
Step 4: Calculate Percentage Change in Price
The percentage change in price is:
Percentage change in price = ((New Price - Initial Price) / Initial Price) x 100
Percentage change in price = ((16 - 15) / 15) x 100
Percentage change in price = 6.67%
Step 5: Calculate Elasticity
Using the formula for price elasticity of supply using point method:
Elasticity = (Percentage change in quantity supplied / Percentage change in price)
Elasticity = (20% / 6.67%)
Elasticity = 3
Interpretation of Results:
The elasticity of supply at price P=15 is 3. This means that a 1% increase in price will result in a 3% increase in quantity supplied.
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The supply function is given as Q=-100 10P.Find the elasticity using point method when price is 15?
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The supply function is given as Q=-100 10P.Find the elasticity using point method when price is 15? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The supply function is given as Q=-100 10P.Find the elasticity using point method when price is 15? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The supply function is given as Q=-100 10P.Find the elasticity using point method when price is 15?.
The supply function is given as Q=-100 10P.Find the elasticity using point method when price is 15? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The supply function is given as Q=-100 10P.Find the elasticity using point method when price is 15? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The supply function is given as Q=-100 10P.Find the elasticity using point method when price is 15?.
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