3.12: Degrees of Elasticity of Supply

The elasticity of supply (Es) comes in various degrees, each depicting how responsive the quantity supplied is to changes in price.

Perfectly elastic supply occurs when even the slightest price change leads to an infinite change in quantity supplied. It is represented as a horizontal supply curve. Conversely, perfectly inelastic supply means the quantity supplied remains constant regardless of price changes. This is depicted as a vertical supply curve. When Es exceeds, supply is considered elastic, indicating that the quantity supplied changes more than proportionately to changes in price. The curve is relatively flat. When Es is less than 1, supply is inelastic, meaning the quantity supplied changes less than proportionately to changes in price, yielding a steeper curve. Unitary elastic supply (Es = 1), indicates that quantity supplied changes in exact proportion to price changes. The slope of the unitary elastic supply curve may be steeper or flatter depending upon the relative scale of the units that appear on the x and y axis. What is important is that the ratio of the two changes must be exactly the same.

Understanding these degrees of Es helps businesses predict market responses to price changes and make informed production and pricing decisions.

Degrees of price elasticity of supply describe how the quantity supplied changes in response to price changes.

First is the perfectly elastic supply. A small price increase leads to an infinite quantity supplied, while a decrease drops it to zero. At the prevailing price, producers will supply any quantity. The supply curve is horizontal, and the elasticity is infinity.

Next is a relatively elastic supply. The percentage change in quantity supplied exceeds the percentage change in price. The supply curve is flatter, and the absolute value of elasticity is less than infinity but greater than one.

Then, there is a unitary elastic supply. The percentage change in quantity supplied equals the percentage change in price. The supply curve is diagonal, and the elasticity has an absolute value of one.

Next, relatively inelastic supply. The percentage change in quantity supplied is less than the percentage change in price. The supply curve is steeper. The absolute value of elasticity ranges from less than one to greater than zero.

Finally, the perfectly inelastic supply. The quantity supplied remains the same, regardless of price changes. The supply curve is vertical, and the elasticity is zero.

• Elasticity of Supply - Measures how quantity supplied responds to changes in price.
• Perfectly Elastic Supply - Quantity supplied changes infinitely with any price change.
• Perfectly Inelastic Supply - Quantity supplied remains unchanged despite price fluctuations.
• Unitary Elastic Supply - Quantity supplied changes in exact proportion to price changes.
• Inelastic Supply - Quantity supplied changes less proportionately to changes in price.

• Define Elasticity of Supply - Explain how it impacts production and pricing decisions (e.g., Elasticity of Supply).
• Contrast Perfectly Elastic vs Inelastic Supply - Discuss their implications on supply curves (e.g., Perfectly Inelastic Supply).
• Explore Degrees of Elasticity - Analyze the range and meaning like inelastic, elastic, unitary (e.g., Inelastic Supply).
• Explain Supply Curves - Describe how different supply curves represent elasticity degrees.
• Apply in Context - Discuss practical implications of various elasticity degrees in a market scenario.

• What is the concept of Elasticity of Supply and how does it influence supplier decisions?
• What differences exist between perfectly elastic and perfectly inelastic supply?
• How do different degrees of elasticity affect the shape and meaning of supply curves?

• Students - Understanding Elasticity of Supply enhances comprehension of economic dynamics.
• Educators - Explaining elasticity and supply curves can clarify complex economics concepts.
• Researchers - Valuable for examining market trends and consumer behaviour.
• Business Owners - Provides insights on pricing strategies and supply management.