ECON 103: Price Elasticity of Supply

Vocabulary practice flashcards covering the definitions, graphical interpretations, determinants, formulas, and elasticity classifications of Price Elasticity of Supply from ECON 103.

Price Elasticity of Supply

A measure of how responsive quantity supplied is to a change in price, calculated as the percentage change in quantity supplied divided by the percentage change in price ($E_s = \frac{\%\Delta Q_s}{\%\Delta P}$).

Elastic Supply Curve vs. Inelastic Supply Curve

A visual comparison of supply curves where the flatter supply curve ($S_e$) represents more elastic, more responsive supply, while the steeper supply curve ($S_i$) represents less elastic, less responsive supply.

Determinants of Price Elasticity of Supply

The three factors that determine how responsive producers are to a price change: 1) Cost of inputs, 2) Time, and 3) Scope of the market.

Cost of Inputs

The key determinant of supply elasticity, reflecting how easy it is for producers to expand output; supply is more elastic when extra resources have low per-unit costs and less elastic when expanding output requires much higher per-unit costs.

Roofing Nails (Input Cost Example)

An example of a good with elastic supply because extra resources can be obtained at relatively low per-unit cost by running another factory shift with the same steel and machines.

Single-Barrel Bourbon (Input Cost Example)

An example of a good with less elastic supply because producing more involves much higher per-unit costs and requires years of aging, preventing supply from keeping up immediately when demand jumps.

Short-Run vs. Long-Run Supply

The principle that supply becomes more elastic as time passes because producers have time to adjust production processes at lower cost, making the short-run supply curve steeper and the long-run supply curve flatter.

Scope of the Market

A determinant of supply elasticity indicating that local supply of a good is more elastic than global supply, as a single locality can ship in products from elsewhere without raising per-unit costs, whereas the global market must expand overall production capacity.

Sign of Price Elasticity of Supply

A characteristic indicating that $E_s$ is always positive because price and quantity supplied move in the same direction.

Midpoint Method for Supply Elasticity

The formula used to calculate elasticity: $E_s = \frac{\%\Delta Q_s}{\%\Delta P}$, where $\%\Delta Q_s = \frac{Q_{\text{after}} - Q_{\text{before}}}{(Q_{\text{after}} + Q_{\text{before}}) \div 2}$ and $\%\Delta P = \frac{P_{\text{after}} - P_{\text{before}}}{(P_{\text{after}} + P_{\text{before}}) \div 2}$.

Elastic Supply

A market condition where $E_s > 1$ and $\%\Delta Q_s > \%\Delta P$, meaning quantity supplied is relatively responsive to a price change.

Inelastic Supply

A market condition where $E_s < 1$ and $\%\Delta Q_s < \%\Delta P$, meaning quantity supplied is relatively unresponsive to a price change.

Unit Elastic Supply

A market condition where $E_s = 1$ and $\%\Delta Q_s = \%\Delta P$, meaning a change in price leads to an exactly proportional change in quantity supplied.

Elasticity (Economic Definition)

A measure that reflects the magnitude of responsiveness between price and quantity, rather than just the directional relationship.