When the price of a commodity changes from Rs.4 per unit to Rs.5 per unit, its market supply rises from 100 units to 120 units. Calculate the price elasticity of supply. Is supply elastic?

Price elasticity of supply = [(Change in quantity supplied) / (Initial quantity supplied)] / [(Change in price) / (Initial price)]

Change in quantity supplied = 120 units - 100 units = 20 units
Initial quantity supplied = 100 units
Change in price = Rs.5 - Rs.4 = Rs.1
Initial price = Rs.4

Price elasticity of supply = (20/100) / (1/4) = 0.2 / 0.25 = 0.8

Since the price elasticity of supply (0.8) is less than 1, the supply is inelastic. This means that a percentage change in price leads to a smaller percentage change in quantity supplied.