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Price Elasticity: Supply

Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price
ES =
% change in Quantity Supplied % change in Price

Elasticity is independent of units

This tells us exactly how quantity supplied responds to a change in price

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Types Of Supply Elasticity

Cross Elasticity of Supply


Three economics, viz F. Gruen, L. Ward and A. Powell have introduced this new concept of elasticity of supply while estimating elasticities of supply for Australian agriculture products.
Esc = Proportionate(percentage) change in quantity supplied of wheat Proportionate (percentage) change in price or paddy

Increase and Decrease in Supply


Increase and Decrease in supply would mean a change in quantity supplied without any change in price. This, therefore, implies a shift in supply schedule to the right implying increase in supply and to the left implying decrease in supply
Y S1
P1 P3 S2 P3 S3

Increase and Decrease in Supply

Backward Sloping Supply Curve


Y S

Price

Quantity

A Special Supply Curve


Y

Price
P

S 0 Q Quantity X

Joint Supply and Composite Supply


When two or more than two commodities are supplied together, it is joint supply.
Sheep

When single commodity is supplied by several sources, it is called composite supply.

Wool

Mutton

Hides