The price elasticity of supply of good X is half the price elasticity of supply of good Y. A 10% rise in price of good Y results in a rise in its supply from 400 units to 520 units calculate the percentage change in quantity supplied of good X when its price falls from Rs. 10 to Rs. 8 per unit.
Es of good Y = % Change in supply of good Y/% Change in price of good Y
Since Es of X is half of Es of Y.
Therefore Es of ‘X’ = 3/2 = 1.5
% Change in supply of X = 1.5 × (–20) or supply of X falls by 30%
