Price and Quantity Demanded are directly related to each other.
An increase in price causes the quantity demanded to also increase, all other things being equal.
Price Elasticity of Supply
Measures the supplier’s response to change in price.
The coefficient of price elasticity of supply is defined as: Remember: Es = coefficient of price elasticity Q D = Quantity Supplied P = Price The coefficient of price elasticity of supply is equal to the percentage change in quantity supplied divided by the percentage change in price. WHERE:∆Qs = QS2 – QS1 ∆ P = P2 – P1 %∆Qs = Qs2 – Qs1 Qs Qs = Qs2 + Qs1 2
RANGES OF ELASTICITY: Supply
A given percentage change in price results in a larger percentage change in quantity supplied.
An increase in price from P 1 to P 2 causes a more than proportionate increase in quantity supplied from Q 1 to Q 2 .
An individual used to raise 10 hogs which sell on the market at a minimum of P4,000 each. For some reasons, the market price per hog reached P5,000. He decided to raise 20. Let us find out how elastic or responsive the production was to price.
Qs1 = 10
P1 = P4,000 each
Qs2 = 20
P2 = P5,000
∆ Qs = ? ; ∆P = ?
%∆Qs = ? ;
Q = ?
E s = 3 - ELASTIC
It means that for every percentage change in price, percentage change in supplied will be 3%.