Price elasticity of supply
The elasticity of supply is a measure of responsiveness of quantity
supplied of a good due to changes in factors influencing supply. Price
elasticity of supply is the measure of the responsiveness of quantity
supplied to a change in the good's own prices, other things remaining
constant.
Supply is said to be inelastic when a given percentage change in price
causes a smaller percentage change in quantity supplied (Si). It is said to be elastic when a given percentage change in price causes bigger
percentage change in quantity supplied (S2) (Figure 2.36).
Inelastic supply (S1), elastic supply (S2) perfectly inelastic supply curve (S0 and perfectly elastic supply curve (S3).
supplied of a good due to changes in factors influencing supply. Price
elasticity of supply is the measure of the responsiveness of quantity
supplied to a change in the good's own prices, other things remaining
constant.
Supply is said to be inelastic when a given percentage change in price
causes a smaller percentage change in quantity supplied (Si). It is said to be elastic when a given percentage change in price causes bigger
percentage change in quantity supplied (S2) (Figure 2.36).
Inelastic supply (S1), elastic supply (S2) perfectly inelastic supply curve (S0 and perfectly elastic supply curve (S3).
In case of inelastic supply ST , a change in price of P-| P2 leads to a
smaller change in quantity supplied Q-]Q2- For elastic supply 82, a
given change in price PiP2 leads to a bigger change in quantity supplied Q1Q2.
If the price elasticity of supply is equal to zero (S0), a fixed quantity
OQ-] is supplied at any price even at a zero price. In case of perfectly
elastic supply curve, (S3) an infinite quantity will be supplied at a
constant price QP. There will be no quantity supplied at prices below
OP.
A unitary elasticity of supply is when the percentage change in quantity supplied is exactly equal to the percentage in price. This is represented by the supply curve which passes through the origin (Figure 2.37).
Unitary price elasticity of supply.
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