The Elasticity of Supply

• Elasticity of supply is the degree of

responsiveness of a change in supply to a
change in price on the part of sellers.
• The coefficient of elasticity of supply is
Percentage Change in Quantity Supplied/
Percentage Change in Price.
The Elastic Supply
Inelastic Supply
Unit elasticity
Perfectly Elastic
Perfectly Inelastic
Factors Influencing Supply Elasticity
1. Nature of the commodity – If a commodity is
perishable, its supply is inelastic. On the other
hand, the supply of a durable commodity is
elastic because its supply can be changed with
the change in its price.
2. Cost of Production – If the per unit cost of
production increases at a faster rate than the
rise in price, the supply will be inelastic. If the
per unit cost of production of a commodity
increases very slowly in response to a price
rise, the supply will be elastic.
3.Time Element – In the longer time period, the
supply of a commodity will be more elastic. In
the short time period, the supply of a commodity
will be more inelastic.
4. Producers’ Expectations – If producers expect
a rise in the price of a commodity in the future,
they will cut down the present supply. As a
result, the supply will be inelastic and vice versa.