Economics Elasticity Of Supply Questions Long
The concept of a perfectly inelastic supply curve refers to a situation where the quantity supplied of a good or service remains constant regardless of changes in its price. In other words, the supply of the good or service is completely unresponsive to price changes.
The formula for a perfectly inelastic supply curve is represented as:
Qs = Qs0
Where:
Qs = Quantity supplied
Qs0 = Initial quantity supplied
In this case, the quantity supplied remains the same regardless of any changes in price. This means that even if the price increases or decreases, the quantity supplied will not change.
A perfectly inelastic supply curve is typically observed in situations where the production of a good or service requires a fixed amount of resources or inputs that cannot be easily adjusted in the short run. For example, if a farmer has a fixed amount of land and can only produce a certain quantity of crops, the supply of those crops would be perfectly inelastic in the short run.
It is important to note that a perfectly inelastic supply curve is a theoretical concept and is rarely observed in real-world markets. In reality, most supply curves have some degree of elasticity, meaning that the quantity supplied will respond to changes in price, although to varying degrees.
The concept of elasticity of supply is crucial in understanding how changes in price affect the quantity supplied in a market. Elasticity of supply measures the responsiveness of quantity supplied to changes in price. A perfectly inelastic supply curve represents the extreme case where there is no responsiveness to price changes.