The Elasticity of Demand and Supply
The Elasticity of Supply is one of the most important chapters of Class 11 Economics. The following article is perfectly designed to portray the price elasticity of supply formula and several other things in light of the law of supply. The elasticity of demand and supply is nothing but the relationship between the price of a particular commodity and the quantity demanded or supplied of that particular commodity. There are various types of markets in the economy. Surprisingly, the elasticity of supply holds true for every type of market.
Define Elasticity of Supply
The quantitative correlation between the price of a commodity and quantity supplied of that commodity is known as the elasticity of supply. The above elasticity of supply definition stands perfect for all types of markets. Therefore, the mathematical alteration in supply with the change in the price can be derived by the concept of elasticity of supply. There are also few other determinants of elasticity of supply.
The most significant factor controlling the supply of a particular good is the price of the good. Mathematically, the value can be derived using the elasticity of supply formula. The elasticity of supply formula is as follows:
Es= [(∆q/q)X 100] ÷ [(∆p/p) X 100]= (∆q/q) ÷ (∆p/p)
Here, ∆q stands for the change in quantity supplied
q Stands for the quantity supplied
∆p stands for the change in price
p stands for the price
Apart from the above-mentioned technique to calculate the elasticity of supply, there are another two methods to derive elasticity of supply formula. Those two formulas are based on the supply curve. One is point elasticity in which elasticity can be calculated at a specific point of time and another is arc elasticity in which the same is calculated between two prices.
Point elasticity of supply formula: Es= (dq/dp) x (p/q)
Arc-elasticity of supply formula: Es= [(q1-q2)/(q1+q2)] x [(p1+p2)/p1-p2)]
Various Types of Price Elasticity of Supply in a Single Graph
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1. Perfectly Elastic Supply:
If there is infinite elasticity, then it is considered a perfectly elastic supply. In this scenario, with a minor fall in the price level, the supply will become zero and with a minor rise in the price, the supply will become infinite. The perfectly elastic supply example is that in such a market the suppliers desire to supply any quantity of the commodity if there is a higher level of price. A perfectly elastic supply curve is depicted as a straight line which is parallel to X-axis.
2. Unit Elastic Supply:
If the change amount supplied is exactly equal to the change in its price, then it is termed as unit elastic supply or unitary elastic supply. In the above-mentioned scenario, the price elasticity of supply is equal to 1.
3. Relatively Greater-Elastic supply:
Relatively greater elastic supply occurs when the change in supply is relatively greater as compared to the change in price. In this case, the value of price elasticity of supply is greater than 1.
4. Relatively Less-Elastic supply:
Relatively Less Elastic supply occurs when the change in supply is relatively lesser as compared to the change in price. In this case, the value of price elasticity of supply is less than 1.
5. Perfectly Inelastic Supply
A service or commodity is termed as perfectly inelastic when a certain quantity of the said commodity can be supplied irrespective of the price. The value of the price elasticity of supply is zero.
Factors Affecting Elasticity of Supply
The factors affecting the price elasticity of supply are as follows:
Determinants of Elasticity of Supply
The determinants of elasticity of supply are as follows:
Number of producers
Effortlessness of switching
Ease of storage
Length of the period of production
The time frame of training
Mobility of factors
Reaction of costs
Did You Know?
Price elasticity of supply depends upon the tenure of the production. This means it is different in the long run and the short run.
Availability of raw materials is one of the important factors affecting the elasticity of supply.
The elasticity of demand and supply is the backbone of microeconomics.
A perfectly elastic supply curve is horizontal to the axis.