Economics Elasticity Of Supply Questions Long
Unitary elastic supply refers to a situation in economics where the percentage change in the quantity supplied is equal to the percentage change in price. In other words, when the price of a product changes, the quantity supplied changes in the same proportion.
When the supply of a good or service is unitary elastic, the elasticity of supply is equal to 1. This means that a 1% increase in price will result in a 1% increase in the quantity supplied, and a 1% decrease in price will lead to a 1% decrease in the quantity supplied.
Unitary elastic supply is often seen as an ideal scenario for producers because it allows them to maintain their revenue and profit levels even when there are changes in price. This is because the increase or decrease in the quantity supplied perfectly matches the change in price, resulting in a constant total revenue.
In practical terms, unitary elastic supply can be observed in industries where producers have the ability to quickly adjust their production levels in response to changes in price. For example, in industries with flexible production processes or ample capacity, producers can easily increase or decrease their output to match changes in demand.
It is important to note that unitary elastic supply is just one of the many possible elasticities of supply. Other types of supply elasticities include perfectly elastic supply (where a small change in price leads to an infinite change in quantity supplied) and perfectly inelastic supply (where the quantity supplied remains constant regardless of price changes).
Overall, unitary elastic supply is a concept that highlights the responsiveness of quantity supplied to changes in price, with a proportional relationship between the two.