# P elasticityissmall1 15 12 elasticityis large1 4 3 0

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: se in price… 100 2…leaves the quantity supplied unchanged Q P \$5\$5 0 100 110 Q 2…leads to a 10% increase (c) Unit Elastic Supply: in quantity supplied Elasticity = 1 S 4 1.An 22% increase in price… 0 100 125 Q 2…leads to a 22% increase in quantity supplied Price Elasticity of Supply (2) (d) Elastic Supply: Elasticity >1 P S \$5 P 1.At any price above \$4, quantity supplied is infinite. \$5\$5 4 4 1.An 22% increase in price… 0 (e) Perfectly elastic Supply: Elasticity = infinite 100 200 Q 2…leads to a 67% increase in quantity supplied 0 S 2…At exactly \$4, producers will supply any quantity. 100 Q How the Price Elasticity of Supply Can Vary How Because firms often have a maximum capacity for production, the elasticity of supply may be very high at low levels of quantity supplied and very low at high levels of quantity supplied. Here, an increase price from \$3 to \$4 increase the quantity supplied from 100 to 200. Because the increase in quantity supplied of 67% is larger than the increase in price of 29%, the supply curve is elastic in this range. By contrast, when the price rises from \$12 to \$15, the quantity supplied rises only from 500 to...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern