The price of commodity S increased from 3,000 FRW to 4,500 FRW but its quantity supplied remained constant. Find its price elasticity of supply?

Price elasticity of supply is calculated using the formula:

Price Elasticity of Supply = (% Change in Quantity Supplied) / (% Change in Price)

Given that the quantity supplied remained constant, the % change in quantity supplied is 0. Therefore, the formula simplifies to:

Price Elasticity of Supply = 0 / (% Change in Price)

The % change in price can be calculated as follows:

% Change in Price = ((New Price - Old Price) / Old Price) x 100
% Change in Price = ((4,500 - 3,000) / 3,000) x 100
% Change in Price = (1,500 / 3,000) x 100
% Change in Price = 0.5 x 100
% Change in Price = 50%

Now, we can substitute the % change in price into the formula for price elasticity of supply:

Price Elasticity of Supply = 0 / 50
Price Elasticity of Supply = 0

Therefore, the price elasticity of supply for commodity S is 0. This means that the quantity supplied does not respond to changes in price.

Formula for Price Elasticity of Supply (PES):

PES = (% Change in Quantity Supplied) / (% Change in Price)

Calculating the Percentage Changes:

- % Change in Price = [(New Price - Old Price) / Old Price] - 100
= [(4,500 - 3,000) / 3,000] - 100
= 50%

- % Change in Quantity Supplied = 0% (since the quantity supplied remained constant)

Substituting Values into the Formula:

PES = (0%) / (50%)
PES = 0

Interpretation:

Since the PES is equal to zero, it means that the supply of commodity S is completely inelastic. This indicates that a change in price has no impact on the quantity supplied. In other words, producers will not change their supply regardless of the price change.