Elasticity of Supply Unit 2.

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Presentation transcript:

Elasticity of Supply Unit 2

Elasticity of Supply How responsive the change in quantity supplied is when there is change in price

Equation: Elasticity of Supply % Change in Quantity Supplied % Change in Price

Elastic Supply Significant change in quantity supplied with change in price When Elasticity is >1

20% change in quantity supplied Elastic Demand 10% change in price 20% change in quantity supplied = 2

Elastic Supply Price Quantity S Not steep

Elastic Supply Examples Products that can be made: Quickly Cheaply With a few, readily available resources

Inelastic Supply Minimal change in quantity supplied with change in price When Elasticity is <1

Inelastic Demand = .5 10% change in quantity supplied 20% change in quantity price 10% change in quantity supplied = .5

Inelastic Supply Price Quantity S Very Steep

Inelastic Supply Examples Production of these G&S take a lot of: Time Money Resources that are not readily available

Perfectly Inelastic Supply NO change in quantity supplied with a change in price Quantity supplied cannot be increased

Perfectly Inelastic Supply Price Quantity S Qty supplied will never change…unless you shift the curve

Unitary Elastic % Change in Quantity Supplied = % Change in Price Elasticity = 1