Posted by
Anjali Kaur
on
Sep 16, 2020
The Price Elasticity of Supply
The price elasticity of supply is a measure of the responsiveness of the quantity supplied to the change in the price of the commodity. It is also defined as the percentage change in quantity supplied of a commodity divided by the percentage change in the price of a commodity. Let’s learn more about it.
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Formula & Slope of the Curve
1. Percentage method of price elasticity of supply
% Change in the quantity supplied = Change in quantity x 100/ Initial quantity
Percentage Change in the price = Change in price x 100/ Initial price
2. Proportionate method of price elasticity of supply
3. Slope Formula of Price Elasticity of Supply
Slope of the supply curve = Change in Price/ Change in Quantity supplied
Price Elasticity of Supply = 1/ Slope of the supply curve X P/Q
Types of Price Elasticity of Supply
There are 5 types of price elasticity of supply:
1. Perfectly Elastic Supply Curve
In this case, Price Elasticity of Supply = Infinity.
The supply curve looks like half E, it means the seller will supply the commodity at the fixed price. As shown below:
2. Perfectly Inelastic Supply Curve
In this case, Price Elasticity of Supply = 0.
The supply curve looks like I shaped, it means the seller will supply the fixed quantity commodity irrespective of the price. As shown below:
3. Unitary Elastic Supply Curve
In this case, Price Elasticity of Supply = 1
The supply curve is perfectly upward sloping, it means the seller will supply the commodity according to the price. The higher the price, the higher will be the quantity supplied. As shown below:
4. Elastic or Greater than Unitary Elastic Supply Curve
In this case, Price Elasticity of Supply > 1
The supply curve looks like the perfectly elastic supply curve, but flatter. As shown below:
5. Inelastic or Less than Unitary Elastic Supply Curve
In this case, Price Elasticity of Supply < 1
The supply curve looks like the perfectly inelastic supply curve, but steeper. As shown below:
ou can read the related concepts:
- The supply curve
- What is production function?
- Terms related to production concept
- Law of diminishing returns to a factor
- Total cost, Total variable cost and Total fixed cost
- The relation between TC, TVC and TFC
- Average total cost
- The demand curve
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