Supply Elasticity

What are 3 types of supply elasticity? Elastic Supply – change in prices causes a relatively larger change in quantity supplied. Inelastic Supply – Change in price causes a relatively smaller change in quantity supplied. Unit elasticity – change in price causes a proportional change in quantity supplied.

What does supply elasticity look like?

Determinants of Supply Elasticity Depends on the nature of production. If firm can adjust production to new prices quickly, then supply is likely to be elastic. If production is such that it takes longer to make adjustments in production, then supply is likely to be inelastic.

Examples Shale oil – In the short run, no matter what price is being offered, it will be difficult to increase production due to huge amount of capital & technology needed before production can be increased very much. (Inelastic) Kites & candy – Changes in production can be adjusted quickly (elastic)

Hint... Only production considerations affect supply elasticity. If firms can react quickly (change their production quickly) to higher/lower prices, supply tends to be elastic. If it takes firms longer to change production in response to price change, supply tends to be inelastic.

What do you think? Supply for which of the following would tend to be elastic? 1.Cars 2.Yatchs 3.Oil 4.notebooks

What do you think? Supply for which of the following would tend to be elastic? 1.Cars 2.Yatchs 3.Oil 4.notebooks

What do you think? Supply for which of the following would tend to be most inelastic? 1.Ships 2.Candy 3.Screw drivers 4.calculators