Posted by Anjali Kaur on Sep 16, 2020
The Price Elasticity of Supply

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

The 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:

What does 'perfectly elastic supply' mean? What are some examples? - Quora
Perfectly Elastic Supply Curve

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:

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Perfectly Inelastic Supply Curve

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:

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Unitary Elastic Supply Curve

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:

Elastic Supply Curve

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:

Inelastic Supply Curve

ou can read the related concepts:

  1. The supply curve
  2. What is production function?
  3. Terms related to production concept
  4. Law of diminishing returns to a factor
  5. Total cost, Total variable cost and Total fixed cost
  6. The relation between TC, TVC and TFC
  7. Average total cost
  8. The demand curve

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