Economics Elasticity Of Supply Questions
The difference between price elasticity of supply and price elasticity of demand in relation to the proportion of inputs lies in the direction of their relationship with price changes.
Price elasticity of supply measures the responsiveness of the quantity supplied to changes in price. It is influenced by the proportion of inputs, as it determines how easily producers can adjust their production levels in response to price changes. When the proportion of inputs is more flexible, the supply becomes more elastic, meaning that producers can quickly and significantly increase or decrease their output in response to price changes.
On the other hand, price elasticity of demand measures the responsiveness of the quantity demanded to changes in price. It is not directly influenced by the proportion of inputs, as it focuses on consumer behavior. When the proportion of inputs is more fixed, the demand becomes less elastic, meaning that consumers are less responsive to price changes and are willing to pay higher prices for the product.
In summary, the difference lies in the fact that price elasticity of supply is influenced by the proportion of inputs and determines the flexibility of producers to adjust their output, while price elasticity of demand focuses on consumer behavior and is not directly affected by the proportion of inputs.