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GROUP D

NAME ROLL NO

ROSHANI CHAUDHARY 11

CHIRAG DHIRAWANI 14

NIRAV DOSHI 16

SHEETAL KALE 25ROHIT MEHTA 35

GUNJAN PITTI 43

MONICA SARDA 51

REENA TRIVEDI 57

INCIA JOBATWALA 61

SAGAR KESHRI 62

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LAYOUT OF PRESENTATION

What is elasticity?

Price elasticity of supply

Factors or determinants

Types of elasticity

Examples

Case study

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WHAT IS ELASTICITY ?

Elasticity is a measure of responsiveness of onevariable to another

Elasticity measures the proportional(percentage) changein one variable relative to proportional change in anothervariable.

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PRICE ELASTICITY OFSUPPLY

It can be defined as the degree ofresponsiveness of supply to a given change in

price.

Since the higher price usually results in anincreased quantity supplied, the percent change inprice and the percent change in quantity suppliedmove in the same direction the price elasticity ofsupply is usually a positive number .

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The formula to find out the elasticity ofsupply is

Percentage change in quantity supplied divided by percentagechange in price.

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The price of a product falls from Rs60 toRs40 causing supply to contract from 120 to100.

The price of a product rises from Rs50 toRs60 causing supply to extend from 100 to

200.

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The price of a product falls from 60 to Rs40 causingsupply to contract from 120 to 100.

PeS= 16%/ 33%= 0.48

The price of a product rises from Rs50 to Rs60causing supply to extend from 100 to 200.

PeS= 100%/ 20% = 5

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Determinants or factors that affect

price elasticity of supply .

The value of price elasticity of supply is positive, becausean increase in price is likely to increase the quantitysupplied to the market and vice versa.

1)SPARE CAPACITY

2) STOCKS

3) EASE OF FACTOR SUBSTITUTION

4) TIME PERIOD

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Inelastic supply

Types of price elasticity of supply

Elastic supply

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Perfectly inelastic

supply

Perfectly elastic

supply

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ES =% change in quantity supplied

% change in price

ES > 1 price-elastic supply

ES = 1 unit-elastic supply

ES < 1 price-inelastic supply

Es = 0 perfectly inelastic supply

Es = Infinity perfectly elastic supply

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Cross elasticity of supply

The cross (price) elasticity of supply measures change in quantitysupplied of one commodity when the price of another commoditychanges .

Cross elasticity of supply can be expressed as:

Esc = proportionate change in quantity supplied of one product

proportionate change in price of another product

Cross elasticity is always negative indicating that a rise in theprice of one good will lead to a fall in the quantity supplied ofalternative good.

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Example of cross elasticity of supply

WheatPaddy

To understand cross elasticity of supply we are taking example ofagriculture commodities wheat and paddy . Since land is a scarcefactor farmers have to be careful about its use .If a farmer grows

wheat on a piece of land ,but if price of paddy goes up then landwill be diverted from wheat production causing fall in quantity ofwheat supplied.

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An empty restaurant plenty

of spare capacity to meetany rise in demand!

When telecommunications

networks get congested at peak

times, the elasticity of supply to

meet rising demand may be low

Examples

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Stocks in a warehouse

businesses with plentiful

stocks can supply quickly and

easily onto the market when

demand changes

For many agricultural

products there are time lagsin the production process

which means that elasticity of

supply is very low in the

immediate or momentary

time period

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Case study

Salt Union and Elasticity of Supply

The Big Freeze has caused a huge rise in the demand for grit to treat road

surfaces. Most of this demand comes from local authorities and inevitably the

supply-side of the market has found it difficult to match production with

demand.

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The Salt Union is the dominant supplier of rock salt to use on Britainsroads. Their mine at Winsford in Cheshire is the UKs biggest rock saltmine and is capable of extracting 30,000 tonnes per week, it has nearly

140 miles of roads some 200 metres below ground. But their plant hasbeen working at full capacity since mid December and the Salt Union hasadmitted that - despite working 24 hours-a-day seven days-a-week at amaximum output of 30,000 tonnes a week, it is not possible to sustainthe unprecedented level of repeat orders coming in. The potash mine atBoulby in Cleveland is the other big source of rock salt in the UK, it too is

working at capacity and has opted to divert planned exports to localauthorities because of unexpected depletion of stocks. The third mainsupplier of rock salt comes from Northern Ireland - the Irish Salt Miningand Exploration Company

Stocks of rock salt have dropped sharply and the main supplier is

working at capacity - two factors that have made the short run supply ofrock salt highly inelastic in response to strong demand. The free marketprice of salt ought to rise in such circumstances and there is evidencethat local councils who have flexible salt supply contracts with the SaltUnion are seeing a rise in the cost of salt per tonne. This BBC magazinearticle tries to unearth some of the detail on salt contract prices

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