Economics Elasticity Of Supply Questions Long
In elastic supply, the relationship between price and quantity supplied is highly responsive or sensitive. This means that a small change in price will result in a relatively larger change in the quantity supplied. In other words, the percentage change in quantity supplied is greater than the percentage change in price.
When the supply of a good or service is elastic, it indicates that producers are able to quickly and easily adjust their production levels in response to changes in price. This is typically the case when there are readily available resources, spare production capacity, and flexible production processes.
In an elastic supply scenario, if the price of a good or service increases, producers will be motivated to increase their production levels to take advantage of the higher prices. As a result, the quantity supplied will increase by a larger proportion than the increase in price. Conversely, if the price decreases, producers will reduce their production levels, leading to a larger decrease in the quantity supplied compared to the decrease in price.
The elasticity of supply is influenced by various factors, including the availability of inputs, the time period under consideration, and the ease of substituting inputs. In the short run, supply may be relatively inelastic as producers may not be able to quickly adjust their production levels due to fixed factors of production. However, in the long run, supply becomes more elastic as producers have more flexibility to adjust their production processes and allocate resources accordingly.
Overall, in an elastic supply situation, the relationship between price and quantity supplied is characterized by a high degree of responsiveness, with quantity supplied changing proportionally more than the change in price.