Economics Elasticity Of Supply Questions Long
The concept of a unitary elastic supply curve refers to a situation where the percentage change in quantity supplied is equal to the percentage change in price. In other words, when the price of a good or service changes, the quantity supplied changes in the same proportion.
A unitary elastic supply curve is represented by a straight line on a graph, with a slope of 1. This means that for every 1% increase in price, there is a 1% increase in quantity supplied, and for every 1% decrease in price, there is a 1% decrease in quantity supplied.
The unitary elastic supply curve is considered to be a balanced or ideal situation for producers. It indicates that producers are able to adjust their supply in response to changes in price, without experiencing significant disruptions or constraints. This implies that the producers have a moderate level of flexibility in their production processes and can easily allocate resources to meet changes in demand.
In practical terms, a unitary elastic supply curve can be observed in industries where production can be easily adjusted in response to price changes. For example, in the agricultural sector, farmers can quickly increase or decrease the quantity of crops they supply based on changes in market prices. Similarly, in industries with flexible production processes, such as software development, companies can easily scale up or down their production to meet changes in demand.
It is important to note that a unitary elastic supply curve is just one of the many possible types of supply curves. Other types include perfectly elastic supply (where a small change in price leads to an infinite change in quantity supplied) and perfectly inelastic supply (where quantity supplied remains constant regardless of price changes).
Overall, the concept of a unitary elastic supply curve highlights the responsiveness of producers to changes in price, indicating a balanced and flexible supply response.