If the price of bus tickets drops from 200 to 175 what happe

If the price of bus tickets drops from $2.00 to $1.75, what happens to the quantity supplied of city bus tickets? How much does supply change?

P $2.00 Q 1200

P $1.75 Q 750

Solution

If the Price of Bus Tickets drops from $2.00 to $1.75

then no. of passengers who travels by bus increases

Therefore the Supply of the city bus tickets also increases

Say,if Quantity of bus tickets increases from 100 to 200

then supply change =

Percentage change in quantity supplied = (200 100) ÷ {(200 + 100) ÷ 2} = 66%

Percentage change in price = ($2 $1.75) ÷ {($2 + $1.75) ÷ 2} 13%

Price elasticity of supply 66% ÷ 13% = 5.07