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# AS Micro Price Elasticity of Supply

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### AS Micro Price Elasticity of Supply

1. 1. Price elasticity of supply
2. 2. Price elasticity of supplyThe market for tractors is supplied by two firms, X andY, each initially having 50 % of the market.A 10 % increase in the price of tractors leads to an increasein output from firm X of 10 % and from firm Y of 20 %. Whatis the price elasticity of supply of tractors in this market?
3. 3. Price elasticity of supplyThe market for tractors is supplied by two firms, X andY, each initially having 50 % of the market.A 10 % increase in the price of tractors leads to an increasein output from firm X of 10 % and from firm Y of 20 %. Whatis the price elasticity of supply of tractors in this market?Price change = 10%, total output change is 15%Therefore the price elasticity of supply = +1.5
4. 4. Elasticity of supply
5. 5. When demand for a good increases, equilibrium pricestays the same. What is the elasticity of supply?Sketch this situation in the supply and demand diagramon the left (below) Price Price D1 D2 Quantity Quantity
6. 6. When demand for a good increases, equilibrium pricestays the same. What is the elasticity of supply?Sketch this situation in the supply and demand diagramon the left (below) Price Price P1 S1 D1 D2 Quantity Quantity
7. 7. When there is an increase in demand for a product, therise in equilibrium price is large but the expansion inquantity produced is small. What is the elasticity ofsupply? Sketch the situation in the supply and demanddiagram on the right (below) Price Price P1 S1 D1 D2 D1 D2 Quantity Quantity
8. 8. When there is an increase in demand for a product, therise in equilibrium price is large but the expansion inquantity produced is small. What is the elasticity ofsupply? Sketch the situation in the supply and demanddiagram on the right (below) Price Price S1 P1 S1 D1 D2 D1 D2 Quantity Quantity
9. 9. When there is an increase in demand for a product, therise in equilibrium price is large but the expansion inquantity produced is small. What is the elasticity ofsupply? Sketch the situation in the supply and demanddiagram on the right (below) Price Price S1 P1 S1 P1 D1 D2 D1 D2 Quantity Q1 Quantity
10. 10. When there is an increase in demand for a product, therise in equilibrium price is large but the expansion inquantity produced is small. What is the elasticity ofsupply? Sketch the situation in the supply and demanddiagram on the right (below) Price Price S1 P2 P1 S1 P1 D1 D2 D1 D2 Quantity Q1 Q2 Quantity
11. 11. Give three reasons why an industry’s supplycurve might be price elastic in the short term Short Spare High stock production capacity levels times