- Created by: April15
- Created on: 29-01-20 10:38
Price elasticity of supply
Price elasticity of supply is the responsiveness of supply to a change in price. It can be calculated using the following formula:
% change in quantity supplied
% change in price
- Since an increase in price causes supply to increase and a decrease in price will cause supply to decrease, price elasticity of supply will be positive.
- If it is more than 1 it is said to be elastic, less than 1 it is inelastic and if it is 1 it is of unit elasticity.
Factors affecting price elasticity of supply:
- The amount of excess capacity in the industry. If…