Factors Affecting the Price Elasticity of Supply

There are some factors that can affect the price elasticity of demand, as follows:
- The ability of the seller / manufacturer to change the amount of production.
This relates to costs and production capacity. Supply will tend to be inelastic if
one of the following occurs:
 High production costs to increase the amount of supply. For example, if
current production has reached economics scale and minimum average costs,
the addition of one unit of production will add the average costs and result in
production being on an uneconomic scale.
 Or the production capacity has been fully utilized, so adding capacity will
require a new factory / machine. For example, a company which requires a
large investment. The supplies will tend to be elastic if what happens is the
opposite.
- Period of analysis
The effect of analysis time on supply elasticity is divided into three:
 A very short period of time. In this period of time, the producer / seller can’t
add to the supply, so it will be perfectly inelastic.
 Short-term. Production capacity can’t be added in the short term, but the
company can still increase production with available capacity by utilizing
existing factors of production. As a result, the supply can be increased in a
relatively small percentage, so the supply is not elastic.
 Long-term. Production and the number of supply of goods are more easily
increased in the long run term, so that the supply is more elastic.
- Stock inventory
The greater inventory will make supply more elastic. This is because producers
can immediately meet the increased demand with existing supplies.
- Ease of substitution of production factors/inputs
The higher mobility of machinery (or other capital) and labor will make supply
more elastic too. The more elastic the mobility of capital and labor, the easier it is
for producers to meet the changes in demand that occur. This is because capital
and labor are more flexible, so they can be added or subtracted whenever needed.