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The Theory Of The Firm Under Perfect Competition
When the price of a good rises from Rs 20 per unit to Rs 30 per unit, the revenue of the firm producing this good rises from Rs 100 to Rs 300. Calculate the price elasticity of supply.
| Price (Rs) | Quantity (uts) | Revenue (Rs) |
| 20 | 5 | 100 |
| 30 | 10 | 300 |
Price elasticity of supply (eS) = Percentage change in quantity supplied/ Percentage change in price.
% change in quantity supplied = (change in quantity supplied / Initial quantity supplies)* 100 = (5/5)*100 =100
% change in price = (change in price/ initial price)*100
(10/20)*100 = 50
Price elasticity of supply (eS) = Percentage change in quantity supplied/ Percentage change in price = 100/50 = 2
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