When the price of a commodity changes from Rs. 4 per units to Rs. 5 per unit, its market supply rises from 100 units to 120 units. Calculate the price elasticity of supply. Is supply elastic ? Give reason.
Es = ∆Q/∆P x P/Q
= 20/1 x 4/100 = 0 8
Supply is inelastic, as Es is less than one.
Detailed Answer :
No, the supply is not elastic. It is inelastic because price elasticity of supply is less than one.
