Elasticity of Supply - SS1 Economics Past Questions and Answers - page 1

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 the quantity supplied. In other words, suppliers are not very responsive to changes in price.

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.