The Elasticity of Supply

Flashcards covering definitions and concepts related to the elasticity of supply, including key terms and their meanings.

Elasticity of Supply

The measure of how much the quantity supplied of a good responds to a change in the price of that good.

Price Elasticity of Supply

The percentage change in quantity supplied divided by the percentage change in price.

Unit Elastic Supply

Occurs when price elasticity of supply equals 1.

Elastic Supply

Occurs when price elasticity of supply is greater than 1.

Inelastic Supply

Occurs when price elasticity of supply is less than 1.

Perfectly Inelastic Supply

Occurs when price elasticity of supply equals 0 and the supply curve is vertical.

Perfectly Elastic Supply

Occurs when price elasticity of supply equals infinity and the supply curve is horizontal.

Midpoint Method

A calculation method used to determine percentage changes in elasticity.

Short-run Elasticity of Supply

The supply response when producers have limited time to adjust to price changes, often resulting in inelastic supply.

Long-run Elasticity of Supply

The supply response when producers can adjust fully to price changes, often resulting in more elastic supply.

Supply Curve Shift

A movement of the entire supply curve due to factors such as changes in production technology or supply resources.

Production Capacity

The maximum output that a company can produce under normal circumstances.

Demand Inelasticity

When a change in the price of a good does not significantly change the quantity demanded.

Supply Inelasticity

When a change in the price of a good does not significantly change the quantity supplied.

Public Policy Paradox

A situation where intended outcomes of policy negatively impact producers or consumers.

Crude Oil Price Elasticity of Supply

A measure indicating how responsive the quantity supplied of crude oil is to price changes.

Revenue Impact of Demand Inelasticity

When total revenue falls due to inelastic demand despite higher supply.