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Consider the following supply schedule (2079 Section C, Q3)

Consider the following supply schedule:

Points: A B C D E
Price (Rs): 0 10 20 30 40
Supply (Units): 100 200 300 400 500

a. Compute the price elasticity of supply at movement from B to D and D to B by proportion method.
b. Compute the price elasticity of supply at midway between B and D and D and B by arc method. Why is arc method considered as more appropriate method than proportion method?
c. How do firms use price elasticity of demand in business decision making? Explain with suitable examples.

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