When the price of a good falls from ₹ 8 per unit to ₹6 per unit, its supply falls by 25 units from 125 units. Calculate elasticity of supply `(E_(s))` by percentage method.

Explanation

Percentage change in Price `= (DeltaP)/(P) xx 100 = (2)/(8) xx 100 = 25%`
Perecantage change is Supply `= (DeltaQ)/(Q) xx 100 = (25)/(125) xx 100 = 20%`
`E_(s) =("Perecntage Change in Supply")/("Percentage change in Price") = (20%)/(25%) = 0.8`
`E_(s) = 0.8` (Supply is less elastic as `E_(s) gt 1`)
`E_(s)` is always positive due to direct relastionship between price and quantity supplied.