Elasticity of Supply Flashcards
What is price elasticity of supply?
The price elasticity of supply measures how much the quantity supplied responds to changes in the price level
What are the formulas for calculating elasticity of supply?
Because the supply curve is upward sloping, the value will always be positive
What is elastic supply?
Supply of a good is elastic if quantity supplied responds substantially to changes in price
Elasticity will be greater than one
At a perfectly elastic supply, elasticity equals infinity
What is inelastic supply?
Supply of a good is inelastic if quantity supplied responds only slightly to price changes
Elasticity will be less than one
At a perfectly inelastic supply, elasticity equals zero
What are the determinants of elasticity of supply?
Length of Time
Very Short Run = Inelastic Supply Curve
Long Run – Elastic
Type of Good Producing
Long-Run Production = Inelastic Supply Curve
Short-Term Production = Elastic
Availability of Inputs
Fixed Supply of Inputs = Inelastic Supply Curve
Easily Available = Elastic Supply Curve
Ease of Entry and Exit
Easy To Enter/Exit = Elastic Supply Curve
Difficult to Enter/Exit = Inelastic Supply Curve
