Question: The quantity supplied and the price of product B are given as follows:
|Price (Rs. Per Kg.)||Quantity Supplied (Kgs. in thousands)|
Draw a supply curve for the supply schedule of product B and find the type of elasticity of supply using the curve.
Solution for homework:
The supply curve for product B is given in Figure
In Figure, when the price of product B is Rs. 45, the quantity supplied is 50,000 kgs. When price increases to Rs. 55, supply reaches to 51,000 kgs. Similarly, as the price of product B increases to Rs. 65, the supply increases to 52,000 kgs, which clearly shows that a change in price is Rs. 10 while the change in supply is 1,000 kgs. In other words, the proportionate change in quantity supplied is less than the change in the price of product B. Thus, the supply of product B is relatively inelastic (es<1).