Sign In
The elasticity of supply (Es) quantifies how responsive the quantity supplied is to changes in price. It is calculated as the ratio of the percentage change in quantity supplied to the percentage change in price.
For example, if the price of a product increases by 10%, and as a result, the quantity supplied increases by 20%, the Es would be 2 (20% change in quantity supplied divided by 10% change in price).
This method helps determine whether supply is elastic, inelastic, or unit elastic. If Es is greater than 1, supply is elastic, meaning a slight change in price leads to a proportionally larger change in quantity supplied. If Es is less than 1, supply is inelastic, indicating that the quantity supplied changes less than proportionately to a change in price. If Es equals 1, supply is unit elastic, meaning the percentage change in quantity supplied equals the percentage change in price.
Understanding Es through the percentage method is crucial for businesses to anticipate how price changes affect their production decisions and overall market dynamics.
From Chapter 3:
Now Playing
Supply and its Elasticities
46 Views
Supply and its Elasticities
74 Views
Supply and its Elasticities
125 Views
Supply and its Elasticities
88 Views
Supply and its Elasticities
55 Views
Supply and its Elasticities
158 Views
Supply and its Elasticities
106 Views
Supply and its Elasticities
342 Views
Supply and its Elasticities
220 Views
Supply and its Elasticities
55 Views
Supply and its Elasticities
217 Views
Supply and its Elasticities
177 Views
Copyright © 2025 MyJoVE Corporation. All rights reserved
We use cookies to enhance your experience on our website.
By continuing to use our website or clicking “Continue”, you are agreeing to accept our cookies.