Calculating the Price Elasticity of Supply using the Point Method

To calculate the price elasticity of supply using the point method, we need to follow these steps:

Step 1: Understand the formula for price elasticity of supply
The price elasticity of supply (Es) is calculated using the formula:
Es = (% change in quantity supplied / % change in price)

Step 2: Identify the initial price and quantity values
In this case, the supply function is given as Q = -100 + 10P, where Q represents quantity supplied and P represents price. We are given that the price is ₹15. So, the initial price (P1) is ₹15.

Step 3: Calculate the initial quantity supplied
To find the initial quantity supplied (Q1), we substitute the initial price of ₹15 into the supply function:
Q1 = -100 + 10(15)
Q1 = -100 + 150
Q1 = 50

Step 4: Identify the new price and quantity values
Since we are using the point method, we need to identify a new price and quantity combination. Let's assume the new price (P2) is ₹20.

Step 5: Calculate the new quantity supplied
To find the new quantity supplied (Q2), we substitute the new price of ₹20 into the supply function:
Q2 = -100 + 10(20)
Q2 = -100 + 200
Q2 = 100

Step 6: Calculate the percentage change in quantity supplied
The percentage change in quantity supplied is calculated using the formula:
% change in quantity supplied = ((Q2 - Q1) / Q1) * 100

Substituting the values:
% change in quantity supplied = ((100 - 50) / 50) * 100
% change in quantity supplied = (50 / 50) * 100
% change in quantity supplied = 100%

Step 7: Calculate the percentage change in price
The percentage change in price is calculated using the formula:
% change in price = ((P2 - P1) / P1) * 100

Substituting the values:
% change in price = ((20 - 15) / 15) * 100
% change in price = (5 / 15) * 100
% change in price = 33.33%

Step 8: Calculate the price elasticity of supply
Finally, we can calculate the price elasticity of supply (Es) by dividing the percentage change in quantity supplied by the percentage change in price:
Es = (% change in quantity supplied / % change in price)
Es = (100% / 33.33%)
Es ≈ 3

The price elasticity of supply using the point method, when the price is ₹15, is approximately 3. This means that the quantity supplied is relatively elastic, as a 1% increase in price will lead to a 3% increase in the quantity supplied.