Elasticity of supply By Mr. Swatanter Singh PGT (ECO.) KV Leh-Ladakh.

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Presentation transcript:

Elasticity of supply By Mr. Swatanter Singh PGT (ECO.) KV Leh-Ladakh

Previous knowledge testing Define supply. What is the relationship beween price and supply ? How do we calculate % change in a variable? What is the meaning of word elastic? What is the meaning of word inelastic ?

Elasticity of supply Price elasticity of supply measures the change in supply of commodity due to change in its price Price elasticity of supply measures the change in supply of commodity due to change in its price

Methods of measuring price elasticity of supply Proportionate method or percentage method Geometric method

Proportionate method or percentage method percentage change in quantity supplied Es = percentage change in price Q1-Q x 100 Q0 Es = P1-P x 100 P0

 Q/Q 0 Es =  P/P 0  Q P Es = x ----  P Q

Numerical Ques: Supply of a commodity increases from 20 units to 40 units when price rises by 25%.Calculate price elasticity of supply. Soluion: percentage change in quantity supplied Es = percentage change in price 40 – x Es = /20 x100 Es = Es = 4

Geometric Method Geometrically,elasticity of supply depends on the origin of supply curve.

Unitary Elastic ( Es = 1) When supply curve starts from origin O Quantity Price Es = 1

Elastic ( Es > 1) When supply curve starts from Y axis O Quantity Price Es > 1

Inelastic ( Es < 1) When supply curve starts from X axis O Quantity Price Es < 1

Perfectly Elastic ( Es = 1) When supply curve is horizontal line parallel to X axis O Quantiy Price Es = 1

Perfectly Inelastic ( Es = 0) When supply curve is vertical line parallel to Y axis O Quantity Price Es = 0

Factors affecting elasticity of supply Nature of input used Dependence on natural factors Risk factor Nature of commodity Technique of production Time factor

Define elasticity of supply.Define elasticity of supply. What is the Es if supply curve making an angle of 30 o at the origin ?What is the Es if supply curve making an angle of 30 o at the origin ? Calculate Es when quantity supplied increase from 30 to 50 due to 20% rise in price.Calculate Es when quantity supplied increase from 30 to 50 due to 20% rise in price. What do you mean by elastic supply?What do you mean by elastic supply? What are the factors affecting Es ?What are the factors affecting Es ? What is the meaning of perfectly inelastic supply ?What is the meaning of perfectly inelastic supply ?

Thanks for your kind attention