Price elasticity of supply measures how responsive the quantity supplied of a good is to changes in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. The elasticity can be elastic (above 1), inelastic (below 1), unitary (equal to 1), perfectly elastic (infinite), or perfectly inelastic (zero). Factors like time, production capacity, and available inventory affect a good's price elasticity of supply. An example is provided where an individual's supply of bags was elastic, with a price elasticity of 4, as quantity supplied increased by 100% when price rose by 25%.

1. SHAHI RAZ AKHTAR PRICE ELASTICITY OF SUPPLY BS COMMERCE IST SEMISTER

3. Price Elasticity of Supply Remember: Es = coefficient of price elasticity QS = Quantity Supplied P = Price PES = % ∆Q S % ∆P Percentage Change in Quantity Supplied Percentage Change in Price PE S =

5. Figure 1. Elastic Supply Curve PRICE P1 P2 0 Q1 Q2 S QUANTITY

6. Figure 2. Inelastic Supply Curve PRICE P1 P2 0 Q1 Q2 S QUANTITY

7. Figure 3. Unitary Supply Curve PRICE P1 P2 0 Q1 Q2 S QUANTITY

8. Figure 4. Perfectly Elastic Supply Curve PRICE P1 0 S QUANTITY

9. Figure 5. Perfectly Inelastic Supply Curve PRICE P1 P2 0 S QUANTITY

13. Q2-Q1 20-10 10 ∆ QS = = = = 1 Q1 10 10 P2-P1 10-8 2 ∆ P = = = = 0.25 P1 8 8

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