At the market price of Rs 10, a firm supplies 4 units of output. The market pric

Question

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

Options:

A . 8

B . 12

C . 14

D . 18

Answer: Option C
:
C
Given that

p_{0} = R s 10, p_{1} = R s 30, q_{0} = 4, ϵ_{s} = 0.5, Δ p = p_{1} - p_{0} = R s 20

ϵ_{s} = \frac{Δ q}{Δ p} \times \frac{p_{0}}{q_{0}} ϵ_{s} = \frac{Δ q}{20} \times \frac{10}{4} = 1.25 Δ q = \frac{1.25 \times 4 \times 20}{10} Δ q = 10 q_{1} = q_{0} + Δ q = 14

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