Elasticity of supply measures the responsiveness of the quantity supplied of a good or service to changes in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.
Key Facts
- Elasticity of Supply: Elasticity of supply measures the degree of responsiveness of the quantity supplied to changes in price. It indicates how much the quantity supplied changes in response to a change in price.
- Elastic vs. Inelastic Supply: An elastic supply occurs when the percentage change in quantity supplied is greater than the percentage change in price. In other words, the quantity supplied is highly responsive to price changes. On the other hand, an inelastic supply occurs when the percentage change in quantity supplied is less than the percentage change in price, indicating a low responsiveness to price changes.
- Factors Affecting Supply Elasticity: Several factors influence the elasticity of supply. These include the availability of inputs, production time, production capacity, and the ease of substituting inputs. If inputs are readily available, production can be increased quickly, resulting in a more elastic supply. Conversely, if inputs are scarce or production capacity is limited, supply becomes less elastic.
- Elasticity Range: Price elasticity of supply can vary across a range of values. It can be perfectly elastic, elastic, unitary elastic, inelastic, or perfectly inelastic. Perfectly elastic supply means that any change in price will result in an infinite change in quantity supplied. Perfectly inelastic supply, on the other hand, means that quantity supplied remains constant regardless of price changes.
Elastic vs. Inelastic Supply
An elastic supply occurs when the percentage change in quantity supplied is greater than the percentage change in price. In other words, the quantity supplied is highly responsive to price changes. On the other hand, an inelastic supply occurs when the percentage change in quantity supplied is less than the percentage change in price, indicating a low responsiveness to price changes.
Factors Affecting Supply Elasticity
Several factors influence the elasticity of supply. These include the availability of inputs, production time, production capacity, and the ease of substituting inputs. If inputs are readily available, production can be increased quickly, resulting in a more elastic supply. Conversely, if inputs are scarce or production capacity is limited, supply becomes less elastic.
Elasticity Range
Price elasticity of supply can vary across a range of values. It can be perfectly elastic, elastic, unitary elastic, inelastic, or perfectly inelastic. Perfectly elastic supply means that any change in price will result in an infinite change in quantity supplied. Perfectly inelastic supply, on the other hand, means that quantity supplied remains constant regardless of price changes.
Conclusion
The elasticity of supply is a key concept in microeconomics. It helps economists understand how producers respond to changes in market conditions and how these responses affect the overall supply of goods and services.
Citations
- Price Elasticity of Demand and Price Elasticity of Supply
- How Does Price Elasticity Affect Supply?
- Introduction to Price Elasticity of Supply
FAQs
What is elasticity of supply?
Elasticity of supply measures the responsiveness of the quantity supplied of a good or service to changes in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.
What is elastic supply?
Elastic supply occurs when the percentage change in quantity supplied is greater than the percentage change in price. In other words, the quantity supplied is highly responsive to price changes.
What is inelastic supply?
Inelastic supply occurs when the percentage change in quantity supplied is less than the percentage change in price, indicating a low responsiveness to price changes.
What factors affect the elasticity of supply?
Several factors influence the elasticity of supply, including the availability of inputs, production time, production capacity, and the ease of substituting inputs.
What is the elasticity range for supply?
Price elasticity of supply can vary across a range of values. It can be perfectly elastic, elastic, unitary elastic, inelastic, or perfectly inelastic.
What is perfectly elastic supply?
Perfectly elastic supply means that any change in price will result in an infinite change in quantity supplied.
What is perfectly inelastic supply?
Perfectly inelastic supply means that quantity supplied remains constant regardless of price changes.
Why is the elasticity of supply important?
The elasticity of supply is a key concept in microeconomics. It helps economists understand how producers respond to changes in market conditions and how these responses affect the overall supply of goods and services.