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Topic: Economics - Elasticity of Supply B.com part 1 Economics Notes  (Read 3630 times)
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« on: July 16, 2010, 12:56:01 PM »

Economics - Elasticity of Supply

Elasticity of Supply

Price elasticity of supply is a measure of the degree to which the quantity supplied in the responds to changes in price.

Mathematically:

Es = % change in Quantity supplied / % change in price.

Elasticity of supply represents the extent of change in supply in response to a change in price.

If the amount supplies rise as compete to rise in price supply said to be elastic.

If the amount supplies rise but not must as compose to rise in price than supply is said to Inelastic.


Categories of Price Elasticity of Supply

There are five degrees of price elasticity of Supply.

1. Infinitely elastic or Perfectly elastic.

2. Elastic

3. Unitary elastic

4. Inelastic

5. Perfectly inelastic


1. Perfectly Inelastic

In Perfectly elastic supply amount supplied at the ruling price is infinite.


2. Elastic Supply

When the % change in the amount of a good Supplied is greater than % change in price we said supply is elastic.


3. Unitary Elasticity

When the % change in the quantity supplied is exactly equal to % change in price than elasticity of supply is unitary.


4. Inelastic Supply

When % change in amount supplied less than % change in price supply is said to be Inelastic.


5. Perfectly Inelastic Supply

When there is no change in amount supplied in response to change in price we said supply is perfectly inelastic.


Measurement of Elasticity of Supply

Like demand, elasticity of Supply has three types.

1. Equal to unity

2. Greater than unity

3. Less than unity

1. Equal to Unity

If % change in quantity supplied is equal to % change in price elasticity is equal to 1 or unity.


2. Greater than unity

If % change in quantity supplied is great than % change in price, elasticity will be great than unity


3. Less than Unity

If the % change in amount supplied is less than % change in price than supply elasticity will be less than unity.
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