Economics Elasticity Of Supply Questions
Price elasticity of supply refers to the responsiveness of the quantity supplied of a good or service to changes in its price. It measures the percentage change in quantity supplied divided by the percentage change in price.
In relation to the proportion of inputs, price elasticity of supply is influenced by the availability and flexibility of inputs used in the production process. If a good or service can be produced using a variety of inputs that are readily available and easily substituted, the supply is likely to be more elastic. This means that a small change in price will result in a relatively larger change in quantity supplied.
On the other hand, if the production process relies heavily on specific inputs that are scarce or difficult to substitute, the supply will be less elastic. In this case, a change in price will have a smaller impact on the quantity supplied.
Overall, the concept of price elasticity of supply in relation to the proportion of inputs highlights the importance of input availability and flexibility in determining the responsiveness of supply to changes in price.