Elasticity and Supply

price of elasticity of supply

percentage in quantity supplied/percentage change in price

inelastic supply

when the elasticity value is less than 1, supply is inelastic. Sellers are not very responsive to price changes. A price increase causes only a small rise in quantity supplied. Percentage change in price is larger than the percentage change in quantity supplied.

unit elastic supply

when elasticity equals 1, supply is unit elastic. Sellers respond moderately to price changes. A price change leads to an equal change in quantity supplied. The supply curve has an intermediate slope.

elastic supply

if elasticity is greater than 1, supply is elastic. Producers are highly responsive to price changes. A price increase results in a large increase in quantity supplied. Percentage change in quantity supplied exceeds the percentage change in price. the supple curve is flatter

perfectly inelastic supply

elasticity equals zero. in rare cases, price changes have no effect on quantity supplied. Producers are unable or unwilling to adjust output, resulting in an elasticity value of zero. this is called perfectly inelastic supply, and the supply curve is a vertical line.

perfectly elastic supply

the other extreme case is when any price drop causes quantity supplied to fall to zero. Here, seller are extremely sensitive to price changes. This is called perfectly elastic supply and the elasticity value is said to be infinite. only thing that comes close is digital streaming platforms.

what factors determine price elasticity of supply?

availability of inputs and time horizon

availability of inputs

firms with quick access to additional inputs (land, labour, or equipment) tend to have a high elasticity. If inputs are readily avail, producers can increase output in response to price increase.

time horizon

sellers are typically more flexible in the long run than in the short run. Thus, the price elasticity of supply usually higher over longer time horizons.