Economics Elasticity Of Supply Questions
The difference between price elasticity of supply and price elasticity of demand lies in their relation to the nature of the good.
Price elasticity of supply measures the responsiveness of the quantity supplied to a change in price. It indicates how much the quantity supplied changes in response to a change in price.
On the other hand, price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. It indicates how much the quantity demanded changes in response to a change in price.
The nature of the good affects the elasticity of supply and demand differently. For example, goods that have readily available inputs and can be produced quickly, such as agricultural products, tend to have a more elastic supply. This means that the quantity supplied can easily be adjusted in response to changes in price.
In contrast, goods that are necessities or have limited substitutes, such as healthcare services, tend to have a more inelastic demand. This means that the quantity demanded does not change significantly in response to changes in price.
Overall, the difference between price elasticity of supply and price elasticity of demand in relation to the nature of the good lies in how the quantity supplied and demanded respond to changes in price.