The Anatomy of a Supply Graph Supply Price $$ Quantity of Supply 5 2030 4
What is Elasticity of Supply? Price elasticity of supply measures the relationship between change in quantity supplied and a change in price. In other words, it measures the amount supply changes when price changes. If it is said to be INELASTIC, there will be a small change in supply due to a large price change. Supply does not change much when the price changes. If it is said to be ELASTIC, there will be a large change in supply due to a small price change. Supply changes a lot when price changes.
Factors That Determine Elasticity of Supply Spare Capacity Stocks Ease of Factor Substitution Time Period
So how do I know if it is Elastic or Inelastic? Economists use a formula to determine the elasticity of supply Percentage change in quantity supplied Percentage change in price = X= X If X>1, the product is elastic, meaning the If X<1, the product is inelastic, meaning the In graphical terms it would mean…
Elastic Graph of Supply Supply Price $$ Quantity of Supply 5 20 50 4
Examples of Inelastic Petrol (gas) – The amount of petrol supplied would not change much when the price of petrol changes, therefore it is inelastic. Tickets (to a concert/sports match) – Tickets are printed in a fixed amount (there are only so many seats available), so no matter how much the price changes, the amount supplied should always stay the same. Tickets would be inelastic.
Elastic Products Clothes – If the price of certain clothes drop, then the production (and therefore supply) of those clothes will drop too. Clothes would be elastic. Electronic goods (games, cameras, etc.) – If the price of a certain electronic, say, a games console were to drop, then production of the games console would drop too. Electronic goods = elastic.