Types of Elasticity of Supply

ELASTICITY OF SUPPLY

It can be defined as the degree of responsivenes of supply to a given change in price.

The formula to find out the elasticity of supply is:

Es = percentage change in quantity supplied / percentage change in price

TYPES OF ELASTICITY OF SUPPLY

i.  Perfectly elastic supply: Where no change in price is needed to cause an increase in quantity supplied. This is explained with the help of a diagram.

Xaxis-quantity supplied

Yaxis- price

SS- supply curve

Explanation: The elasticity of supply is infinity when a small change in price leads to an infinitelylargechangeinthequantitysupplied.Itisperfectlyelasticsupply.[E=?]

ii. Perfectly in elastic supply: Here a large change in price causes no change in quantity supplied. It is zero elastic supply [E=0]. This is explained with the help of a diagram.

X axis-quantity supplied

Y axis- price

SS- supply curve

Explanation: The figure shows that even if the price increases from p to p1 there is no change in the quantity supplied.

iii. Unitary elastic: W here a given proportionate change in price causes an equally proportionate change in quantity supplied. This is explained with the help of a diagram.

X axis-quantity supplied

Y axis- price

SS- supply curve

Explanation: Elasticity of supply is unity when the change in supply is exactly proportionate to the change in price. [E=1].

Relatively elastic: Where a small change in price causes a more than proportionate change in quantity supplied. The price elasticity o f supply is greater than unity [E >1 ].This is explained with the help of a diagram.

X axis-quantity supplied

Y axis- price

SS- supply curve

Explanation: The figure shows that there is a small increase in price fro m P to P1, but it has resulted in a large increase in quantity supplied from Q to Q1. It is also known as relatively elastic supply.

v. Relatively inelastic Supply: W here a large change in price causes a less than proportionate change in quantity supp lied. The elasticity o f supply is lesser than unity [E <1]. This is explained with the help of a diagram.

X axis-quantity supplied

Y axis- price

SS- supply curve

Explanation: The figure shows that there is a large increase in price from P to P1, but it has resulted in only a small increase in quantity supplied from Q to Q1. It is also known as relatively inelastic supply.