Economics Supply And Demand Questions Medium
The concept of 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 in response to a one percent change in price.
Price elasticity of supply is determined by various factors, including the availability of inputs, production time, and the ability of producers to adjust their production levels.
If the price elasticity of supply is elastic, it means that the quantity supplied is highly responsive to changes in price. In this case, a small change in price will result in a relatively larger change in quantity supplied. This typically occurs when producers have the ability to quickly adjust their production levels or when there are readily available inputs.
On the other hand, if the price elasticity of supply is inelastic, it means that the quantity supplied is not very responsive to changes in price. In this case, a change in price will result in a relatively smaller change in quantity supplied. This usually occurs when producers are unable to quickly adjust their production levels or when there are limited inputs available.
Understanding the price elasticity of supply is crucial for both producers and consumers. For producers, it helps them determine how much they can increase or decrease their production in response to changes in price. For consumers, it provides insights into how changes in price will affect the availability of goods and services in the market.