Economics 1021A Elasticity

Spam cigarettes food trips to disney world nannies

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Unformatted text preview: the following goods are normal elastic, normal inelastic or inferior? • Spam • Cigarettes • Food • Trips to Disney World • Nannies Price Price Elasticity of Supply • a measure of the responsiveness of a product’s quantity supplied to a change in the product’s price • = % change in quantity supplied % change in price • = change in quantity / average quantity change in price / average price in price average price Price (dollars per pizza) Price Elasticity of Supply Price Elasticity of Supply 40.00 An increase in demand brings ... Sa Large price change and small quantity and small quantity change change 30.00 20.00 … a large price rise... 10.00 … and a small quantity increase D1 D0 0 5 10 13 15 20 25 Quantity (pizzas per hour) Price (dollars per pizza) Price Price Elasticity of Supply 40.00 Small price change and large large quantity change change An increase in demand brings ... 30.00 21.00 20.00 10.00 Sb … a small price rise... … and a large quantity increase D1 D0 0 5 10 15 20 25 Quantity (pizzas per hour) Price Price Elasticity of Supply • elastic supply – a % change in a product’s price causes a greater % change in the quantity supplied • inelastic supply – a % change in a product’s price causes a smaller % change in the quantity supplied Price Perfectly Perfectly Inelastic Supply S1 Elasticity of supply supply = 0 Quantity Quantity supplied is the same for any price! price! 0 Quantity Price Unit Unit Elastic Supply S1 Elasticity of supply = 1 S2 0 Quantity Price Perfectl Perfectly Elastic Supply Elasticity of supply = ∞ S3 Suppliers will offer ANY quantity at this thi price 0 Quantity Factors That Affect Supply Factors That Affect Supply Elasticity Elasticity • Resource substitution • Time frame – Momentary- none of the required resources can be varied – short run - at least one of the required resources can be varied – long run - all of the required resources can be varied...
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