Economic Presentation.

1. PRESENTATION ON ELASTICITY OF
SUPPLY
BHASHKAR KUMAR
DKAC/033/2016-17

2. Definition:-
 It is defined as the responsiveness of the
quantity supplied of a good to its market price.
 More precisely, it is percentage change in
quantity supplied divided by the percentage
change in price.
PriceinChangePercentage
SupplyQuantityinChangePercentage
=Es

3. Degrees of elasticity of supply :-
• Perfectly elastic supply (Es=∞)
• Relatively elastic supply (1<Es<∞)
• Perfectly inelastic supply (Es=0)
• Relatively inelastic supply (0<Es<1)
• Unitary elastic supply (Es=1)

4. Perfectly elastic supply :-
 Percentage change in quantity demanded much
more greater than percentage change in price.
 Slightest change in price leads to infinite
change in quantity demanded.
 Revenues increase when price
decreases.

5. Relatively elastic supply :-
 It is a lesser proportionate change in
the price of a commodity followed by
a larger proportionate change in
quantity demanded of that commodity.
 MM1>PP1

6. Perfectly inelastic supply :-
 Whatever changes in price leaves quantity demanded
unaffected.
 Percentage change in quantity demanded much less
then percentage change in
price.
 Revenues decrease when price decreases.

7. Relatively inelastic supply :-
 Supply is said to be relatively inelastic,
when the percentage change in
quantity supplied is less then
corresponding percentage change in
price. In this case the elasticity of supply
is less than one.

8. Unitary elastic supply:-
 When percentage change in quantity
supplied equals the percentage change
in price.
 Here the elasticity supply is equal to One.

9. Determinant of price elasticity of supply:-
 Time period :- It is the period of time required to
adjust the supplies to the change in prices. The
biological characteristics of the product dictate the
changes of responsiveness.
 Ability to store output :- The goods which can be
safely stored have relatively elastic supply over the
goods which are perishable and do not have storage
facilities.

10.  Factor mobility :- If the factor of production can be
easily moved from one use to another, it will affect
elasticity of supply. The higher the mobility of factor,
the grater is elasticity of supply of the good and vive
versa.
 Changes in marginal cost production :- If with the
expansion of output, marginal cost increases and
marginal return declines, the price elasticity of supply
will be less elastic to that extent.

11.  Availability of infrastructure facilities :- If infrastructure
facilities for expending output of a particular good in
response to the rise in prices, the elasticity of supply will
be relatively more elastic.
 Excess supply
 Agricultural or industrial products

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