Elasticity of Supply Flashcards

1
Q

Elasticity of Supply

A
\+ A measure of the responsiveness of
the quantity supplied to a price
change.
\+ The elasticity of supply measures the
responsiveness of the quantity
supplied to a change in the price of a
good when all other influences on
selling plans remain the same.
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2
Q

What determines supply elasticity?

A

+Number of producers: ease of entry into the market.
+Spare capacity: it is easy to increase production if there is a
shift in demand.
+Ease of switching: if production of goods can be varied, suppl
is more elastic.
+Ease of storage: when goods can be stored easily, the elastic
response increases demand.
+Length of production period: quick production responds to a
price increase easier.
+Time period of training: when a firm invests in capital the
supply is more elastic in its response to price increases.
+Factor mobility: when moving resources into the industry is
easier, the supply curve in more elastic.
+Reaction of costs: if costs rise slowly it will stimulate an
increase in quantity supplied. If cost rise rapidly the stimulus to
production will be choked off quickly.
1 2
+The amount of time it takes producers to shift
resources between alternative uses to alter
production of a good can determine the degree
of price elasticity of supply.
+ The easier and more rapid the transfer of resources, the greater is
the price elasticity of supply.
+ The longer a firm has to adjust to a price change, the greater the
elasticity of supply.

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3
Q

Short run

A

+In the short run, producers are able to change the quantities of
some but not all the resources they employ.
+ This time period is too short to change plant capacity but long enough to
use fixed plant more or less intensively.
+ The supply of a product is more elastic than the market period.

inelastic-unit

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4
Q

Long run

A

In the long run, producers are able to change all the
resources they employ.
▻ This time period is long enough for firms to adjust their plant
sizes and for new firms to enter (or existing firms to exit) the
industry.
▻ The supply of a product is more elastic than in the short run.

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5
Q

Market Period

A

Perfectly Inelastic

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6
Q

more producers

A

elastic

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7
Q

spare capacity: easily increase production

A

elastic

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8
Q

ease of switching: cannot be varied

A

inelastic

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9
Q

quick production

A

elastic

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10
Q

time period of : a firm does not invest in capital the

supply

A

inelastic

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11
Q

difficult to transport

A

inelastic

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12
Q

rapid reaction of cost

A

inelastic

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13
Q

gradual reaction of cost

A

elastic

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