The market price of a good changes from ₹5 to ₹20. As result, the quantity supplied by a firm increasae by 15 units. The preice elasticity of the firm's supply curve us 0.5 . Find the initial and final output levels of the firms.

Explanation

Given : Original Price (P) = ₹5, New Price `(P_(1))` = ₹20, Change in Price `(DeltaP)` = ₹ 15, Change in Quantity `(DeltaP)` = 15 units , Elasticity of Supply `(E_(s))` = 0.5
Price Elasticilty of Supply `(E_(s)) = (DeltaQ)/(DeltaP)xx (P)/(Q)`
`0.5 = (15)/(15) xx (5)/(Q)` i.e., Q or Initial Output = 10 units
As price increases, the quantity supplied will also increases. It means
Final Output = Initial Output (Q) + Change in Quanity = 10 + 15 = 25 units