P RICE ELASTICITY OF SUPPLY Price elasticity of supply measures the responsiveness of the quantity supplied of a product to a change in price. There are three types of elasticity of demand. Supply that is elastic Supply that is unit elastic Supply that is inelastic

E LASTIC S UPPLY Supply is relatively elastic if the quantity of a particular good or service supplied (offered for sale) changes by a larger proportion than the change in price. For example, a 10 per cent increase in price results in a 20 per cent increase in quantity of goods or services supplied.

U NIT E LASTIC S UPPLY Supply is unit elastic if the quantity of a particular good or service supplied (offered for sale) changes by the same proportion than the change in price. For example, a 10 per cent increase in price results in a 10 per cent increase in quantity of goods or services supplied.

I NELASTIC S UPPLY Supply is relatively inelastic if the quantity of a particular good or service supplied (offered for sale) changes by a smaller proportion than the change in price. For example, a 10 per cent increase in price results in a 5 per cent increase in quantity of goods or services supplied.

F ACTORS THAT DETERMINE PRICE ELASTICITY OF SUPPLY Storability or Durability Items that can be stored successfully without deterioration such as minerals, wool, wine, electrical goods will generally have a more elastic supply curve. In such cases if prices rise sellers can quickly and simply access the spare supplies to increase quantity supply.

F ACTORS THAT DETERMINE PRICE ELASTICITY OF SUPPLY Resource mobility and unused spare capacity The quantity of a particular product supplied is likely to be more elastic if production levels can be readily and inexpensively changed by moving resources between industries.

F ACTORS THAT DETERMINE PRICE ELASTICITY OF SUPPLY Time Period In the short terms it is often difficult for firms to expand their supply following a price rise due to resources being immobile or limited spare capacity. In the long term supply becomes more elastic as the availability of resources increases.