Elasticity of Supply - SS1 Economics Lesson Note

The elasticity of supply is a concept in economics that measures the degree of responsiveness of the quantity of a good supplied to changes in its price. It is usually expressed as a ratio of the percentage change in the quantity supplied to the percentage change in price.

When the quantity supplied of a good is highly responsive to changes in its price, we say that the good has elastic supply. In other words, a small change in price leads to a large change in the quantity supplied. When the quantity supplied is not very responsive to changes in price, we say that the good has an inelastic supply. In this case, a change in price does not lead to a significant change in the quantity supplied. 

Elastic supply means that a small change in price leads to a relatively large change in quantity supplied. In other words, suppliers are very responsive to changes in price. Inelastic supply, on the other hand, means that a change in price leads to a relatively small change in quantity supplied. In other words, suppliers are not very responsive to changes in price.

Factors that influence the elasticity of supply:

The elasticity of supply is influenced by various factors, including the availability of raw materials, the level of technology, and the time frame being considered. Several factors can influence the elasticity of supply, including:

• Time: Over time, suppliers may be able to adjust their production processes or expand their capacity, making their supply more elastic in the long run.

Availability of inputs: If suppliers rely on inputs that are difficult to obtain or expensive, their supply may be less elastic because they cannot easily ramp up production.

Level of technology: Suppliers who have access to advanced technology may be able to increase their supply more easily, making their supply more elastic.

The number of producers: In a market with many producers, each supplier may have less influence over the market price, making their supply more elastic.

Spare capacity: If suppliers have unused capacity, they can increase their supply quickly and easily.