Supply ElasticitySupply Elasticity

Elasticity of Supply,Elasticity of Supply,

Is the percentage change in quantity supplied associated with a percentage change in price.

Es = % Qs / % P

Es = QS X P0

P Q0

Interpreting Elasticity of Interpreting Elasticity of SupplySupply

If Es > 1 elastic supply

Es < 1 inelastic supply

Es = 1 unitary elastic supply

If the Supply curve is a straight line:

P

Qs/ut

S

If the supply curve cuts theprice axis (Y), then supply is ELASTIC

Es > 1

If the Supply curve is a straight line:

P

Qs/ut

S

If the supply curve cuts thequantity axis (X), then supply is INELASTIC

Es < 1

If the Supply curve is a straight line:

P

Qs/ut

S

If the supply curve comes outof the origin, then supply is UNITARY ELASTIC

Es = 1

Sections of ElasticitySections of Elasticity

P

Qs/ut

S

Es > 1

More Elastic

Less Elastic

Sections of ElasticitySections of Elasticity

P

Qs/ut

S

Es < 1

More Inelastic

Less Inelastic

Time and Elasiticy of Time and Elasiticy of SupplySupply

The longer the time period for adjustment, the more price elastic is the supply curve.

The longer the time allowed for adjustment to a Price, the more firms are able to figure out ways to increase or decrease production in an industry.

The longer the time allowed for adjustment to a Price, a

greater amount of resources can flow into or out of an industry by means of expansion or contraction of existing firms.