Commodites X and Y have equal price elasticity of supply. The supply of X rises form 400 units to 500 units due to a 20 per units rise in its price . Calculate the precentage fall in supply of Y if its price falls by 8 per cent.

Explanation

Percentage change in supply `= (DeltaQ)/( Q) xx 100= (100)/(400) xx 100 = 25%`
`E_(s) = ("Percentage Change in Supply")/("Percentage change in Price") =(25%)/(20%) = 1.25`
Now, Price Elasticity of Good Y= 1.25 (as both X and Y have same price elasticity ).
Let us now calculate % fall in Supply for Y

`(E_(s)) = ("Percentage Change in Supply")/(" Perecentage change in Price")`
`= 1.25 = ("Perectnage fall in supply ")/(" 8)` lt brgt Perecntage fall in supply = 10%
Supply of good Y will fall by 10%