Suppose the supply equation is Q 20 070p What is the price

Suppose the supply equation is: Q= 20 + 0.70p

What is the price elasticity if the market price is $5?

Is this Elastic or inelastic?

Solution

Let us substitute value if price po=4 in above equation Q=20+0.70(4)=22.8

LET IT BE qo

Then substitute p1= 4 in above equation then the Q=23.5 let it be q1

elasticity = proportionate change in quantity supplied/proportionate change in price=23.5-22.8/23.5+22.8/2 whole divided by 5-4/5+4/2=0.029/0.222=0.13

Since it is less than 1 it is inelastic