Elasticity of SupplyElasticity of SupplyHow How responsiveresponsive the the change in change in quantity suppliedquantity supplied is when is when there is there is change in pricechange in price
EquationEquation::Elasticity of SupplyElasticity of Supply
% Change in Quantity Supplied% Change in Quantity Supplied
% Change in Price% Change in Price
Elastic SupplyElastic Supply
SignificantSignificant change change in quantity in quantity supplied with change in pricesupplied with change in price
When Elasticity is When Elasticity is >1>1
Elastic DemandElastic Demand
10% change in price10% change in price
20% change in quantity 20% change in quantity suppliedsupplied
= 2= 2
ElasticElastic Supply Supply ExamplesExamples
Products that Products that can be made:can be made:
QuicklyQuickly
CheaplyCheaply
With a few, With a few, readily readily available available resourcesresources
Inelastic SupplyInelastic Supply
MinimalMinimal change change in quantity in quantity supplied with change in pricesupplied with change in price
When Elasticity is When Elasticity is <1<1
Inelastic DemandInelastic Demand
20% change in quantity price20% change in quantity price
10% change in quantity 10% change in quantity suppliedsupplied
= .5= .5
InelasticInelastic Supply Supply ExamplesExamples
Production of Production of these G&S take a these G&S take a lot of:lot of:
TimeTime
MoneyMoney
Resources that Resources that are not readily are not readily availableavailable
PerfectlyPerfectly Inelastic Inelastic SupplySupply
NONO change change in quantity supplied in quantity supplied with a change in pricewith a change in price
Quantity supplied cannot be Quantity supplied cannot be increasedincreased
PerfectlyPerfectly Inelastic Inelastic SupplySupply
PricePrice
QuantityQuantity
SS
Qty Qty supplied supplied
will never will never change…change…
unless you unless you shift the shift the
curvecurve