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Measurement of elasticity of supply

There are two methods to measure elasticity of supply. They are
  • Point elasticity
  • ƒArc elasticity

Point elasticity

Under the point method of measuring elasticity, we study the changes in quantity supplied at a particular point using the below formula.
 
Point elasticity = p / q x q / p
 
Where,
p = Price
q = Quantity
p = Change in price
q = Change in quantity
 
Example
Quantity (units) Price (₹)
50 10
75 15
Solution
p = ₹ 10
 
q = 50
 
∆p = (15-10) = ₹ 5
 
∆q = (75-50) = 25
 
Using the following formula,
 
= p / q x ∆q / ∆p
 
We get,
 
= 10 / 50 x 25 / 5
 
= 1
 

Arc elasticity

In order to measure the elasticity of supply between price changes more accurately, we use the following formula.
 
q / p x (p1 + p2) / (q1 + q2)
 
Where,
p = change in price and,
q= change in quantity
p1 = original price
p2 = new price
q1 = original quantity
q2 = new quantity
 
Example
Quantity (units) Price (₹)
250 100
280 120
Solution
= ∆q / ∆p x (p1 + p2) / (q1 + q2)
We get
= 30 / 20 x (100 + 120) / (250 + 280)
= 0.6
 




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