At the market price of ₹10, a frim supplies 4 units of output . The market price increases to ₹30.? The prices elasticity of the frim's supply is 1.25. What quantity will the firm supply at the new price ?

Explanation

Given : Original Quantity (Q) =4 units, Original Price (P) = ₹ 10, New Price `(P_(1))` = ₹30 , Rise in Price `(DeltaP)` = ₹20, Elasticity of Supply `(E_(s))` = 1.25
Price Elasticity of Suplly `(E_(s)) = (DeltaQ)/(DeltaP) xx (P)/(Q)`
`1.25 = (DeltaQ)/(DeltaP) xx (10)/(4) i.,e Delta Q = 10`
As price increases, the qunatity supplied will also increases . It means,
New Quantity = Qriginal Qunatity (Q) + Change in Quantity (DeltaQ)
New Quantity = 4+ 10 = 14 units