Scribd
Upload
20 views

Elasticity of Supply

Uploaded by

Nazneen Siddiqui
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
20 views

Elasticity of Supply

Uploaded by

Nazneen Siddiqui
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

ELASTICITY OF SUPPLY

The price elasticity of supply refers to the response to a change in a good or


service's price by the supply of that good or service. According to basic economic
theory, the supply of goods decreases when its price increases.

Here, ES denotes the elasticity of supply which is equal to the percentage change
in quantity supplied divided by the percentage change in the price of the
commodity.

5 Types of Elasticity of Supply


Price elasticity of supply is of 5 types; perfectly elastic, more than unit elastic,
unit elastic supply, less than unit elastic, and perfectly inelastic. Read below to
know them in more detail.

1. Perfectly Elastic Supply: Price Elasticity of Supply is said to be perfect


elastic supply when at a particular price, there is infinite supply for a commodity,
and with even a small change in its price, the supply becomes zero. Perfectly
Elastic Supply indicates that the suppliers are willing to sell only when the prices
of commodities are high. The price elasticity in this case is infinite; i.e., ES =
∞, and the supply curve is a horizontal straight line parallel to the X-axis.

PROF. NAZNEEN SIDDIQUI M.COM, B.ED, BMS, PGDHRM


2. Perfectly Inelastic Supply: Price Elasticity of Supply is said to be perfect
inelastic supply when the quantity supplied does not change with the change in
price. It shows that the supply would remain the same irrespective of the price.
The price elasticity in this case is zero; i.e., ES = 0, and the supply curve is a
vertical straight line parallel to the Y-axis.

3. Unitary Elastic Supply: Price Elasticity of Supply is said to be unit elastic


supply when a price change is precisely equal to the change in quantity supplied.
The price elasticity of supply is 1 in such cases; i.e., ES = 1, and the supply curve
is a straight line passing through the origin. The quantity supplied rises from OQ
to OQ1 with a rise in price from OP to OP1. As QQ1 is proportionately equal to
PP1, the elasticity of supply is equal to 1.

PROF. NAZNEEN SIDDIQUI M.COM, B.ED, BMS, PGDHRM


4. Relatively Elastic Supply: Price Elasticity of Supply is said to be more than
unit elastic when the percentage change in supply is relatively greater than the
percentage change in price. The price elasticity of supply in such cases is greater
than 1, i.e., ES > 1, and the supply curve intercepts on the Y-axis. The quantity
supplied rises from OQ to OQ1 with a rise in price from OP to OP1. As QQ1 is
proportionately more than PP1, the elasticity of supply is more than 1.

5. Relatively inelastic Supply: Price Elasticity of Supply is said to be less than


unit elastic supply when the percentage change in supply is relatively lower than
the percentage change in price. Price Elasticity of Supply is less than 1 in such
cases; i.e., ES < 1, and the supply curve intercepts on the X-axis. The quantity
supplied rises from OQ to OQ1 with a rise in prices from OP to OP1. As QQ1 is
proportionately less than PP1, the elasticity of supply is less than 1.

PROF. NAZNEEN SIDDIQUI M.COM, B.ED, BMS, PGDHRM

You might also like