Supply Elasticity

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Supply Elasticity
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Elasticity of Supply,

• Is the percentage change in quantity supplied
  associated with a percentage change in price.
• Es ? Qs / ? P

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• Es ??QS X P0
• ?P Q0

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Interpreting Elasticity of Supply

• If
• Es gt 1 ? elastic supply
• Es lt 1 ? inelastic supply
• Es 1 ? unitary elastic supply

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If the Supply curve is a straight line
P
S
Es gt 1
If the supply curve cuts the price axis (Y), then
supply is ELASTIC
Qs/ut
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If the Supply curve is a straight line
S
P
Es lt 1
If the supply curve cuts the quantity axis (X),
then supply is INELASTIC
Qs/ut
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If the Supply curve is a straight line
S
P
Es 1
If the supply curve comes out of the origin, then
supply is UNITARY ELASTIC
Qs/ut
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Sections of Elasticity
Es gt 1
P
S
Less Elastic
More Elastic
Qs/ut
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Sections of Elasticity
Es lt 1
P
S
Less Inelastic
More Inelastic
Qs/ut
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Time and Elasiticy of Supply

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

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• 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.

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• 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.