Elasticity of Supply

Topics: Supply and demand, Price elasticity of supply, Elasticity Pages: 3 (549 words) Published: January 5, 2014
Price Elasticity of Supply
The rate of change in supply of the commodities due to change in the prices is known as elasticity of supply. Price elasticity of supply is a measurement of percentage change in quantity supplied of a commodity in response to some percentage change in its price. es= (% change in Qty supplid )/(% change in price )

es = = ΔQ/ΔP× P/Q
Degrees of Price Elasticity of Supply:-
Perfectly Elastic Supply:-When important and radical changes occur in supply of any commodity without any change or very little change in its price, it is known as perfectly elastic supply. It is an imaginary concept, as in real life. The degree of price elasticity of supply is ∞. (es=∞) The supply curve is parallel to X axis. E.g.:

Price Qty.
10
1015
20

0 Q Q1
Quantity of commodity
Perfectly Inelastic Supply:-When there is no change in supply of any commodity, in spite of what so ever changes in its price, it is known as perfectly inelastic supply, i.e. the supply of the commodity remains unchanged. The degree of price elasticity is 0. (es=0)

The supply curve is parallel to Y axis.
PriceQty.
1015
2015

Quantity of commodity
Highly Elastic Supply:-When the proportionate change in price of any commodity is low, but as a result there of the proportionate change in its supply is high, then it is known as highly elastic supply. Degree of supply is greater than 1. (es>1) PriceQTY.

10
1515
25

Quantity of commodity
Elastic Supply:-When the proportionate change in the price of a commodity and the resulted proportionate change in its supply are equal, it is known as elastic supply or elastic supply equal to unit. The degree of price elasticity of supply is equal to 1. (es=1) The supply line is positive a 45◦ angle. PriceQty supplied

10
1515
20

Quantity of commodity
Inelastic Supply:-When the proportionate change in the price of...
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