Tag: law of supply and elasticity of supply

Elasticity of supply quantifies the rate of change in the quantity supplied in response to a change in the price of the commodity.

The standard formula for price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

In the short run, producers have limited ability to adjust production factors, making supply relatively less elastic compared to the long run.

Elasticity = (% change in Q) / (% change in P). % change in Q = (100/1000) = 10%. % change in P = (3000/12000) = 25%. Elasticity = 10/25 = 0.4.

A perfectly inelastic supply curve means quantity supplied is constant regardless of price, which is represented by a vertical line parallel to the Y-axis.

As the time horizon increases, producers have more flexibility to change their production levels, leading to a more elastic supply.

Elasticity of supply is affected by many factors, including the nature of the commodity, production technology, and future price expectations.

Elasticity = (% change in Q) / (% change in P). % change in Q = (250/1000) = 25%. % change in P = (3000/12000) = 25%. Elasticity = 25/25 = 1.

In the long run, firms can adjust all inputs and scale of production, resulting in a more elastic supply curve compared to the short run.