Economics Elasticity Of Supply Questions Long
In a perfectly elastic supply, the relationship between price and quantity supplied is such that any change in price will result in an infinite change in quantity supplied. This means that the quantity supplied is extremely responsive to changes in price.
In a perfectly elastic supply, producers are able to supply any quantity of a good or service at a constant price. This occurs when the supply curve is horizontal, indicating that the quantity supplied is not affected by changes in price. This situation typically arises when producers have excess capacity and can easily adjust their production levels to meet any increase or decrease in demand.
For example, let's consider a perfectly elastic supply of smartphones. If the price of smartphones increases, producers can immediately increase their production to meet the higher demand without any constraints. Conversely, if the price decreases, producers can easily reduce their production without any difficulty. In both cases, the quantity supplied can change infinitely without affecting the price.
It is important to note that a perfectly elastic supply is an idealized concept and rarely exists in the real world. In reality, there are usually limitations on production capacity, availability of resources, and other factors that prevent producers from infinitely adjusting their supply in response to price changes. However, the concept of perfectly elastic supply helps us understand the extreme responsiveness of quantity supplied to changes in price.