1. Elasticity of Supply

2. Elasticity of Supply
Is the percentage change in quantity supplied associated with a percentage change in price.
Elasticity of supply measures the ratio of the percentage change in the quantity supplied of a product to the percentage change in its price.
A commodity’s elasticity of supply depends on how easy it is to shift resources into the production of that commodity and how the costs of producing the commodity vary as its production varies.

3. Calculating
Es = %  Qs / %  P
Es = Qs X Po
P Qo

4. Degree Elasticity of Supply
Es is indefinite  perfectly elastic
Es = 0  perfectly inelastic
Es > 1  elastic supply
Es < 1  inelastic supply
Es = 1  unitary elastic supply

5. Perfectly elastic supply
If the price falls only small amount per unit, then the quantity supplied falls to zero. The price is too low to sustain any producer in the market.
Elasticity of supply is indefinite.

6. Perfectly elastic supply
Es is indefinite
If the supply curve is horizontal,
then supply is
PERFECTLY ELASTIC S
Qs/ut

7. Perfectly inelastic supply
A perfectly inelastic supply represents a situation in which sellers sell a fixed quantity of good for sale.
The price increase from A to B has not fed to increase in quantity supplied. The quantity supplied is totally unresponsiveness to changes in price.
The supply curve is vertical = Es = 0

8. Perfectly inelastic supply
Es = 0 S
If the supply curve is vertical,
then supply is
PERFECTLY INELASTIC
Qs/ut

9. Elastic supply
When the percentage increase in the price of a good brings about, a larger percentage increase in the supply of a good.
The supply curve has a flatter slope : Es > 1

10. Elastic supply Es > 1 If the supply curve cuts the
price axis (Y), then supply is
ELASTIC
Qs/ut

11. Inelastic supply
When the percentage change in price of a good causes a smaller percentage in quantity supplied.
The supply curve has a steeply sloped : Es < 1

12. Inelastic supply Es < 1 If the supply curve cuts the
quantity axis (X), then supply
is INELASTIC
Qs/ut

13. Unit elastic supply
The percentage change in price brings about the same percentage change in quantity supplied of a good.
the supply curve comes out of the origin : Es = 1

14. Unit elastic supply Es = 1 If the supply curve comes out
of the origin, then supply
is UNITARY ELASTIC
Qs/ut

15. Determinants of Price Elasticity of Supply
Time
Ability to store output
Factor mobility
Change in cost of production
Excess supply
Availability of infrastructure facilities
Agricultural or industrial products

16. Time
If the price of a commodity rises and the producers have enough time to make adjustment in the level of output, the elasticity of supply will be more elastic.
If the time period is short and the supply cannot be expanded after a price increase, the supply is relatively inelastic.

17. Ability to store output
The goods which can be safety stored have relatively elastic supply over the goods which are perishable and do not have storage facilities.

18. Factor mobility
If the factors of production can be easily moved from one use to another, it will affect elasticity of supply. The higher the mobility of factors, the greater is the elasticity of supply of the good and vice versa.

19. Changes in cost of production
If with the expansion of output, marginal cost increases and marginal return declines, the price elasticity of supply will be less elastic to that extent.

20. Excess supply
When there is excess capacity and the producer can increase output easily to take advantage of the rising prices, the supply is more elastic.
In case the production is already up to the maximum from the existing resources, the rising prices will not affect supply in the short period. The supply will be more inelastic.

21. Availability of infrastructure facilities
If infrastructure facilities are available for expanding output of a particular good in response to the rise in prices, the elasticity of supply will be relatively more elastic.

22. Agricultural or industrial products
In agriculture, time is required to increase output in response to rise in prices of goods. The supply of agricultural goods is fairly inelastic.
As regards the supply of manufactured consumer goods, it is comparatively easy to increase production in a short period. Therefore, the supply of consumer goods is fairly more elastic.

23. Features of elasticity of supply
Elastic goods
Inelastic goods
PES value
Greater than 1
Less than 1
A rise in price means
A larger rise in supply
A smaller rise in supply
Slope of supply curve
Flat
Steep
The good is produced
Rapidly
Slowly
The time period is
Months
Days
The firm has
Large stocks
Limited stocks
Example
Mortobike
Beef