Elasticity of Supply

Elasticity of Supply - obvious from the fact that supply is...

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Elasticity of Supply: Like demand, elasticity of supply can also be classified into two major divisions: one the highly elastic, unitary elastic and highly inelastic type and two, the extreme cases of the perfectly elastic and the perfectly inelastic type. a) Highly elastic, unitary elastic and highly inelastic: Elasticity of supply can similarly be defined and computed at varying prices and quantities supplied. Elasticity of supply is the degree of responsiveness with which quantity supplied changes with a given change in the price. This can be expressed with a similar formula: An important difference between the price elasticity of demand and that of supply is that the latter is positive in value (as against the negative value in case of elasticity of demand). This is
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Unformatted text preview: obvious from the fact that supply is a direct function of price: and both quantity and price change in the same direction . This will be clear from the following example . The values of q and P have been selected from the supply schedule given above. The elasticity of supply also shows variations in its value for different commodities. Accordingly supply elasticity for different goods can be unit , (e s = 1) more than one (e s > 1) or less than one (e s < 1). The goods can then be categorized as relatively elastic or inelastic in supply. Elasticity of supply is also of considerable practical importance in its policy applications ....
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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