Factors affecting Supply

Time The longer the time period to increase production, the more elastic the supply will be. Seller of fresh vegetables- Supply cannot increase production in a day or even a month Supply is inelastic and remains so until more vegetables can be planted, harvested and brought to market.

Ease of Storage When the price of a product drops, sellers have two options. They can either sell the product at the new price or put it into storage until the price increases again. Steel industry enjoys high supply elasticity because it is easy to store steel. Agricultural industries have low supply elasticity because it’s difficult to store large quantities of produce for an extended period.

Cost factors Increasing supply may be costly depending upon the industry. Car manufacturers may be able to increase supply in the short term by requiring workers to put in more overtime. A permanent increase in production may be much more costly because a new factory may have to be built. CYU page 101 Questions 1 and 2