ELASTICITY OF SUPPLY
of producers to changes in the price of their goods or services. As a general
rule, if prices rise so does the supply.
of supply is measured as the ratio of proportionate change in the quantity
supplied to the proportionate change in price. High elasticity indicates the
supply is sensitive to changes in prices, low elasticity indicates little
sensitivity to price changes, and no elasticity means no relationship with
price. Also called price elasticity of supply.
elasticity of supply measures the relationship between change in quantity
supplied and a change in price. The formula for price elasticity of supply is:
change in quantity supplied / Percentage change in price
Kinds Of Supply Elasticity
1. Price elasticity of supply:
elasticity of supply measures the responsiveness of changes in quantity
supplied to a change in price.
2. Perfectly inelastic:
is no response in supply to a change in price. (Es = 0)
3. Inelastic supply:
proportionate change in supply is less than the change in price (Es =0-1)
4. Unitary elastic:
percentage change in quantity supplied equals the change in price (Es=1)
change in quantity supplied is more than the change in price (Ex= 1- ∞)
6. Perfectly elastic:
Suppliers are willing to supply any amount at a given price (Es=∞) 44 The major determinants of elasticity of supply are availability of substitutes in the market and the time period, Shorter the period higher will be the elasticity.