Price Elasticity of Supply..

 Meaning of Price Elasticity of Supply:

Law of supply explains only the direct relationship between quantity supplied of a commodity with its price but the law does not state the degree of change in supply to the change in price.This law indicates only the direction of changes but not the degree.Elasticity of supply explains the degree of change in supply.

"Elasticity of Supply is measure the change in quantity supplied due to change in its prices."

Elasticity means responsiveness if the change in supply is greater than its price,it is said that it have higher elasticity if change in supply is less than its price so it is said that it is less elastic.

Formula of Price Elasticity of Supply =

        Es=%∆quantity supplied 

               %∆change in price.

Types of Elasticity of Supply..

1). Perfectly inelastic supply (Es=0)-When quantity supplied does not change but price is change it is said that supply is perfectly inelastic.

Px(rs). QSx(kg)

10.        100

12.        100 

       

Perfectly inelastic supply 

2) Inelastic supply (Es<1)-When percentage change in quantity supplied is less than the percentage change in price,so supply is called less elastic or less than 1 .for eg if price of commodity rise by 20%,but supply rise by 10%,in that case it shown as ( Es<1) 

Es means elasticity of supply and 1is for price it means price is more than  supply.

Px(rs) QSx(kg)

10.      100

12.       110

Inelastic supply or less elastic supply 

3) Unitary Elastic supply - (Es=1) When percentage change in quantity supplied and percentage change in prices is equal that is called Unitary Elastic supply .For eg - 20%increase in price and 20%increase in supply.

Px(rs). QSx(kg)

10.         100

12.         120

Unitary Elastic supply 

4) Highly Elastic supply (Es>1) When quantity supplied is very much change compare to its price that is called highly elastic supply.For eg 20%rise in prices and 50% rise in quantity supplied,so it is called highly elastic supply or elastic supply.

Px(rs).  QSx(kg)

10.        100

12.        150

Elastic supply or highly elastic supply 

5) Perfectly elastic supply (Es=~)When price of commodities no change or minor change but quantity supplied is very much change (rise or fall ) that situation is known as perfectly elastic supply.It is straight line parallel to x axis.

Px(rs) QSx(kg) 

10.        100

10.         400

Perfectly elastic supply