Economics Elasticity Of Supply Questions
The difference between elastic and perfectly elastic supply lies in the responsiveness of quantity supplied to changes in price.
Elastic supply refers to a situation where a change in price leads to a relatively larger change in quantity supplied. In other words, the supply is sensitive to price changes. This occurs when producers can easily adjust their production levels in response to price fluctuations, such as in industries with low production costs or excess capacity.
On the other hand, perfectly elastic supply occurs when a small change in price leads to an infinite change in quantity supplied. This means that producers are willing and able to supply any quantity at a specific price, resulting in a horizontal supply curve. Perfectly elastic supply is rare in reality and typically only exists in theoretical scenarios.