Economics Elasticity Of Supply Questions Medium
The concept of a relatively elastic supply curve refers to a situation where a small change in price leads to a relatively larger change in the quantity supplied. In other words, the supply is highly responsive to changes in price.
When the supply curve is relatively elastic, it means that producers are able to quickly and easily adjust their production levels in response to changes in price. This could be due to various factors such as readily available inputs, flexible production processes, or excess capacity.
In terms of graphical representation, a relatively elastic supply curve is flatter or more horizontal compared to a relatively inelastic supply curve. This indicates that a small change in price results in a larger change in quantity supplied.
The elasticity of supply is measured by the price elasticity of supply (PES) coefficient, which is calculated as the percentage change in quantity supplied divided by the percentage change in price. If the PES coefficient is greater than 1, it indicates a relatively elastic supply curve.
A relatively elastic supply curve has important implications for market dynamics. When demand increases, and the price rises, producers with a relatively elastic supply curve can quickly increase their output, leading to a larger increase in quantity supplied. On the other hand, if demand decreases and the price falls, producers with a relatively elastic supply curve can easily reduce their output, resulting in a larger decrease in quantity supplied.
Overall, the concept of a relatively elastic supply curve highlights the responsiveness of producers to changes in price, indicating their ability to adjust production levels efficiently.