ELASTICITY OF SUPPLY

ELASTICITY OF SUPPLY SHOWS RESPONSIVENESS OF

SUPPLY DUE TO CHANGE IN PRICE OF A COMMIDITY.

Es = % change in supply / % change in price

 DEGREES / MAGNITUDE OF
ELASTICITY OF SUPPLY

THERE ARE 5 DEGREES OF ELASTICITY OF SUPPLY

PERFECTLY ELASTIC SUPPLY
SUPPLY WILL BE PERFECTLY ELASTIC WHEN PRICE OF A
COMMIDITY REMAINS CONSTANT BECAUSE A SMALL
FALL IN THE PRICE OF A COMMIDITY WILL REDUCE THE
SUPPLY TO ZERO.
PERFECTLY INELASTIC SUPPLY

SUPPLY WILL BE PERFECTLY INELASTIC IF SUPPLY DOES

NOT CHANGE , PRICE MAY RISE OR FALL BUT SUPPLY WILL
REMAN SAME . IT HAPPEN IN CASE OF EXTREME
PERISHABLE GOODS .
UNITARY ELASTIC SUPPLY

IF PERCENTAGE CHANGE IN SUPPLY IS EQUAL TO

PERCENTAGE CHANGE IN PRICE , SUPPLY WILL BE
UNITARY ELASTIC .
MORE ELASTIC / ELASTIC SUPPLY
( Es > 1 )

IF PERCENTAGE CHANGE IN SUPPLY IS MORE THAN

PERCENTAGE CHANGE IN PRICE , SUPPLY WILL BE MORE
ELASTIC . FOR EG – DURABLE GOODS
LESS ELASTIC / INELASTIC SUPPLY
( Es < 1 )

IF PERCENTAGE CHANGE IN SUPPLY IS LESS THAN

PERCENTAGE CHANGE IN PRICE , SUPPLY WILL BE LESS
ELASTIC. FOR EG-GENERAL PERISHABLE GOODS
FACTOR EFFECTING ELASTICITY OF
SUPPLY

NATURE OF COMMODITY – ELASTICITY OF SUPPLY DEPENDS UPON NATURE OF

COMMODITY. IF IT IS POSSIBLE TO STOCK THAT COMMODITY i.e. IT IS DURABLE ,
SUPPLY WILL BE MORE ELASTIC BUT IF THE COMMODITY CANNOT BE STOCKED i.e.
PERISHABLE , SUPPLY WILL BE LESS ELASTIC .

NATURE OF INPUT USED – IF INPUT USED TO PRODUCE THE COMMODITY ARE

EASILY AVAILIBLE IT WILL BE MORE ELASTIC BUT IF INPUTS ARE NOT EASILY
AVAILIBLE SUPPLY WILL BE LESS ELASTIC
NATURE OF TECHNOLOGY – IF TECHNOLOGY OF PRODUCTION IS SIMPLE , SUPPLY WILL BE MORE
ELASTIC BUT IF TECHNIQUES IS COMPLEX , SUPPLY WILL BE LESS ELASTIC .

NATURE OF ENTERPRENEUR – IF ENTERPRENEUR IS OF RISK BARING NATURE HE WILL BE READY TO

INCREASE SUPPLY WHEN THERE IS SMALL RISE IN PRICE . SO , SUPPLY IS MORE ELASTIC . BUT IF
ENTERPRENEUR IS NOT READY TO BARE RISK , SUPPLY WILL BE LESS ELASTIC

TIME PERIOD – IN SHORT PERIOD SUPPLY IS LESS ELASTIC BUT IN LONG RUN SUPPLY IS MORE
ELASTIC

ROLE OF NATURE – IF PRODUCTION OF COMMODITY DEPENDS UPON NATURAL FACTORS FOR EG. –
AGRICULTURAL GOODS , SUPPLY WILL BE LESS ELASTIC BUT IF IT IS MAN MADE COMMODITY FOR
EG. – INDUSTRY GOOD SUPPLY WILL BE MORE ELASTIC

COST OF PRODUCTION – IF COST OF PRODUCTION IS VERY HIGH , SUPPLY IS LESS ELASTIC

WHEREAS IF COST PRODUCTION IS LOW , PRODUCER WILL BE MORE RESPONSIVE TOWARDS
CHANGE IN PRICE.
Q1 – WHAT IS MEANT BY TERM SUPPLY?

Q2 – WHAT IS MEANT BY SUPPLY SCHEDULE?

Q3 – DEFINE SUPPLY CURVE?

Q4 – STATE THE LAW OF SUPPLY?

Q5 – DEFINE MARKET SUPPLY?

Q6 – WHAT CAUSES A MOVEMENT ALONG A SUPPLY CURVE OF A GOOD?

Q7 – WHAT IS MEANT BY EXTENSION IN SUPPLY?

Q8 – WHAT IS MEANT BY CONTRACTION IN SUPPLY?

Q9 – DEFINE INCREASE IN SUPPLY?

Q10 – DEFINE DECREASE IN SUPPLY?
Q11 – WHAT IS MEANT BY PRICE ELASTICITY OF SUPPLY?
Q12 – WHEN IS THE SUPPLY OF A COMMODITY CALLED ELASTIC?
Q13 – WHEN DOES SUPPLY BECOME MORE ELASTIC?
Q14 – WHEN DOES SUPPLY BECOME LESS ELASTIC?
Q15 – WHAT IS MEANT BY ZERO ELASTIC SUPPLY?
Q16 – PRICE ELASTICITY OF SUPPLY IS 0.8. IS SUPPLY ELASTIC OR
INELASTIC AND WHY?
Q17 – GIVE REASON FOR RIGHTWARD SHIFT IN SUPPLY CURVE?
Q18 – GIVE REASON FOR LEFTWARD SHIFT IN SUPPLY CURVE?
Q19 – DIFFERENCE BETWEEN CHANGE IN QUANTITY SUPPLY AND CHANGE
IN SUPPLY?
Q20 – DIFFERENCE BETWEEN INCREASE IN SUPPLY AND EXTENSION IN
SUPPLY?
Q21 – DIFFERENCE BETWEEN DECREASE IN SUPPLY AND CONTACTION
IN SUPPLY?
Q22 – DIFFERENCE BETWEEN MARKET SUPPLY AND INDIVIDUAL SUPPLY
CURVE?
Q23 – FIRMS SUPPLY CURVE SHOWS ITS SUPPLY FUNCTION. COMMENT?
Q24 – WHAT CAUSE A DOWNWARD MOVEMENT IN SUPPLY CURVE?
Q25 – WHAT IS MINIMUM SUPPLY PRICE OF A COMMODITY?
Q26 – WHAT ARE BULLISH AND BEARISH BUSINESS EXPECTATIONS?
Q27 – WHY MORE OF A COMMODITY IS SUPPLIED AT A HIGHER PRICE?
Q28 – WHAT ARE THE DIFFERENT TYPES OF ELASTICITY OF SUPPLY?
Q29 – STATE THE FACTORS WHICH INFLUENCE ELASTICITY OF
SUPPLY?
Q30 – SUPPLY IS MORE RESPONSIVE TO PRICE IN THE LONG PERIOD AS
COMPARED TO SHORT PERIOD?
Q31 – WHEN PRICE OF A GOOD INCREASES FROM RS15 PER UNIT TO RS19 PER UNIT, ITS ELASTICITY OF SUPPLY
INCREASES FROM 75 UNITS TO 95 UNITS. CALCULATE ELASTICITY OF SUPPLY?
Q32 – THE PRICE ELASTICITY OF SUPPLY IS 4. WHEN ITS PRICE FALLS FROM RS10 TO RS8 PER UNIT, ITS QS
FALL BY 400 UNITS CALCULATE THE NEW QUANTITY AT REDUCED PRICE?
Q33 – TOTAL REVENUE OF A FIRM RISES FROM RS50 TO RS100 WHEN THE PRICE OF THE PRODUCT RISES FROM
RS5 PER UNIT TO RS10 PER UNIT CALCULATE ES?
Q34 – PRICE OF A COMMODITY INCREASES FROM RS 10 TO RS12 PER UNIT AS A RESULT ITS SUPPLY RISES
FROM 35 UNIT TO 42 UNIT FIND ES?
Q35 – AS A RESULT OF 15 PERCENT RISE IN THE PRICE OF A COMMODITY,ITS SUPPLY INCREASES FROM 25
UNITS TO 30 UNITS CALCULATE ES?
Q36 – THE PRICE OF A COMMODITY, IS RS12 PER UNIT AND ITS QS IS 500 UNITS. WHEN ITS PRICE RISES
FROM RS 15 PER UNIT , ITS QS RISES TO 650 UNITS . CALCULATE ES?
Q37 – ES IS UNITY . A FIRM SUPPLIES 25 UNITS OF THIS PRODUCT AT A PRICE OF RS5 PER UNIT . IF THE PRICE
OF A PRODUCT RISES TO RS 6 HOW MUCH QUANTITY OF THE PRODUCT WILL BE SUPPLIED BY THE FIRM?
Q38 – WHEN THE PRICE OF THE COMMODITY RISES FROM RS 10 TO RS11 PER UNIT , ITS QS RISES BY 100
UNITS ITS PRICE ES IS 2 CALCULATE QS AT THE INCRASED PRICE?
Q39 – PRICE ES OF A GOOD IS 2 . BY WHAT PERCENTAGE SHOULD ITS PRICE RISE SO THAT THE SUPPLY RISES
BY 30 PER CENT?
Q40 – PRICE ES OF A GOOD IS 2 A PRODUCER SUPPLIES 100 UNITOF A GOOD AT A PRICE OF RS 20 PER UNIT AT
WHAT PRICE WILL HE SUPPLY 80 UNITS?
Q41 – SUPPLY MAY REMAIN CONSTANT EVEN WHEN QS CHANGES? STATE TRUE OR FALSE?
Q42 SUPPLY NEVER CHANGES UNLESS PRICE CHANGES.
Q43 – A PRODUCER SUPPLIES MORE OF A COMMODITY AT A HIGHER PRICE.
Q44 – INCREASE IN PRICE LEADS TO FORWARDAND SHIFT IN SUPPLY CURVE OF A
COMMODITY
Q45 – INCREASE IN SUPPLY MEANS MORE IS SOLD BECAUSE MARKET PRICE TENDS TO
INCREASE
Q46 – CONTRACTION IN SUPPLY CAUSE A SHIFT IN SUPPLY CURVE
Q47 – IF ES=0 , SUPPLY CURVE BECOMES A HORIZONTAL STRAIGHT LINE
Q48 – WHEN A FIRM IS USING SOME RIGID TECHNOLOGY ITS ES TENDS TO BE HIGH
Q49 – ES=1ONLY IF SUPPLY CUVE FORMS A 45 ANGLE AT THE ORIGIN IS IT TRUE
Q50 – IN THE LONG PERIOD ES TENDS TO BE LOWER THAN IN SHORT PERIOD