CHAPTER 5ELASTICITY AND ITS APPLICATION105responds substantially to changes in the price. Supply is said to be inelasticif thequantity supplied responds only slightly to changes in the price.The price elasticity of supply depends on the flexibility of sellers to change theamount of the good they produce. For example, beachfront land has an inelasticsupply because it is almost impossible to produce more of it. By contrast, manu-factured goods, such as books, cars, and televisions, have elastic supplies becausethe firms that produce them can run their factories longer in response to a higherprice.In most markets, a key determinant of the price elasticity of supply is the timeperiod being considered. Supply is usually more elastic in the long run than in theshort run. Over short periods of time, firms cannot easily change the size of theirfactories to make more or less of a good. Thus, in the short run, the quantity sup-plied is not very responsive to the price. By contrast, over longer periods, firms can
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.