Elasticity
of supply measures the change in the amount that a firm supplies in response
to a change in price. It is measured as follows
percentage change in quantity supplied
percentage change in price
Again the Q is on top,
remember QPR.
Values of price elasticity of supply
·
Elasticity is greater than one  the good is elastic and is highly
responsive to changes in price. A percentage change in price leads to a
larger percentage change in the quantity supplied. A straight line supply
curve will intersect the price axis.
·
Elasticity is equal to one  the good has unitary elasticity, a
percentage change in price will lead to an equal percentage change in the
quantity supplied. Any straight line supply curve that intersects the origin
will have unitary elasticity.
·
Elasticity is less than one  the good is inelastic and not very
responsive to changes in price. A percentage change in price leads to a
smaller percentage change in quantity. . A straight line supply curve will
intersect the quantity axis.
·
Elasticity is equal to zero  the good is perfectly inelastic and a
change in price lead to no change in the quantity supplied.
·
Elasticity is equal to infinity  the good is perfectly elastic and
any decrease in price will cause the quantity supplied to fall to zero.
The
different supply curves are shown below:
