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When the price of the commodity increases from 200 per unit to 250per unit and consequently the quantity supplied rises from 1000 units to 1100units what will be the coefficient of elasticity of supply?
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When the price of the commodity increases from 200 per unit to 250per ...
Calculation of Coefficient of Elasticity of Supply
The coefficient of elasticity of supply measures the responsiveness of the quantity of a commodity supplied to a change in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.
Formula:
Coefficient of Elasticity of Supply = (% Change in Quantity Supplied / % Change in Price)
Given:
Initial Price (P1) = 200
Final Price (P2) = 250
Initial Quantity (Q1) = 1000
Final Quantity (Q2) = 1100
Calculation:
Percentage change in price = ((P2 - P1) / P1) x 100 = ((250 - 200) / 200) x 100 = 25%
Percentage change in quantity supplied = ((Q2 - Q1) / Q1) x 100 = ((1100 - 1000) / 1000) x 100 = 10%
Coefficient of Elasticity of Supply = (% Change in Quantity Supplied / % Change in Price) = 10% / 25% = 0.4
Interpretation:
The coefficient of elasticity of supply is 0.4, which means that the quantity supplied is relatively inelastic with respect to price changes. This implies that a 1% increase in price would result in a less-than-proportional increase of 0.4% in quantity supplied. In other words, suppliers are less responsive to price changes, and it may take a substantial price increase to induce a relatively small increase in the quantity supplied.
The coefficient of elasticity of supply measures the responsiveness of the quantity of a commodity supplied to a change in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.
Formula:
Coefficient of Elasticity of Supply = (% Change in Quantity Supplied / % Change in Price)
Given:
Initial Price (P1) = 200
Final Price (P2) = 250
Initial Quantity (Q1) = 1000
Final Quantity (Q2) = 1100
Calculation:
Percentage change in price = ((P2 - P1) / P1) x 100 = ((250 - 200) / 200) x 100 = 25%
Percentage change in quantity supplied = ((Q2 - Q1) / Q1) x 100 = ((1100 - 1000) / 1000) x 100 = 10%
Coefficient of Elasticity of Supply = (% Change in Quantity Supplied / % Change in Price) = 10% / 25% = 0.4
Interpretation:
The coefficient of elasticity of supply is 0.4, which means that the quantity supplied is relatively inelastic with respect to price changes. This implies that a 1% increase in price would result in a less-than-proportional increase of 0.4% in quantity supplied. In other words, suppliers are less responsive to price changes, and it may take a substantial price increase to induce a relatively small increase in the quantity supplied.
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When the price of the commodity increases from 200 per unit to 250per unit and consequently the quantity supplied rises from 1000 units to 1100units what will be the coefficient of elasticity of supply?
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When the price of the commodity increases from 200 per unit to 250per unit and consequently the quantity supplied rises from 1000 units to 1100units what will be the coefficient of elasticity of supply? 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 When the price of the commodity increases from 200 per unit to 250per unit and consequently the quantity supplied rises from 1000 units to 1100units what will be the coefficient of elasticity of supply? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the price of the commodity increases from 200 per unit to 250per unit and consequently the quantity supplied rises from 1000 units to 1100units what will be the coefficient of elasticity of supply?.
When the price of the commodity increases from 200 per unit to 250per unit and consequently the quantity supplied rises from 1000 units to 1100units what will be the coefficient of elasticity of supply? 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 When the price of the commodity increases from 200 per unit to 250per unit and consequently the quantity supplied rises from 1000 units to 1100units what will be the coefficient of elasticity of supply? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the price of the commodity increases from 200 per unit to 250per unit and consequently the quantity supplied rises from 1000 units to 1100units what will be the coefficient of elasticity of supply?.
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