Q. 85.0( 1 Vote )

When the price of

Answer :

Price elasticity = Percentage change in Qs/Percentage change in P

= (ΔQs/ΔP)*(P/Qs)

= (20/1)*(4/100) = 0.8

The price elasticity of supply of the commodity is 0.8. The supply is inelastic in nature. When the change in price results in a less than proportionate change in the quantity supplied, the supply is considered as inelastic. The elasticity coefficient of inelastic supply will be less than 1 (Es<1). Graphically, it will be a steep upward sloping curve.

E.g., Gasoline

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