A firm supplies 10 units of a good at a price of Rs. 5 per unit. Price Elasticity of Supply is 1.25. What quantity will the firm supply at a price of Rs. 7 per unit.
Given, ${{E}{s}}$ =1.25, P = Rs. 5
${{P}{1}}$ = Rs.7, Q = 10
${{Q}{1}}$=?,
∆P = ${{P}{1}}$ - P = 7-5 = 2
Price Elasticity of Supply (${{E}_{s}}$) = ∆Q/∆P X P / Q
1.25 = ∆Q/2 X 5/10,∆Q = 1.25 x 4 =5
${{Q}{1}}$ = Actual Quantity + Change in Quantity =
= Q+∆Q = 10+5
${{Q}{1}}$ = 15 units