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Price Elasticity of Supply Formula:
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Price Elasticity of Supply (E_s) measures the responsiveness of the quantity supplied of a good to a change in its price. It shows how much the quantity supplied changes when the price changes by 1%.
The calculator uses the Price Elasticity of Supply formula:
Where:
Explanation: The formula calculates how sensitive the quantity supplied is to price changes. A higher absolute value indicates greater responsiveness.
Details: Understanding supply elasticity helps businesses make production decisions, governments design tax policies, and economists analyze market dynamics. It indicates how quickly producers can adjust output in response to price changes.
Tips: Enter the percentage change in quantity supplied and percentage change in price as decimal numbers (e.g., 10% as 10). Both values are required for calculation.
Q1: What does different E_s values mean?
A: E_s > 1 = elastic supply; E_s < 1 = inelastic supply; E_s = 1 = unit elastic; E_s = 0 = perfectly inelastic; E_s = ∞ = perfectly elastic.
Q2: What factors affect supply elasticity?
A: Production time, availability of inputs, technology, storage capacity, and spare production capacity all influence how quickly suppliers can respond to price changes.
Q3: How is supply elasticity different from demand elasticity?
A: Supply elasticity measures producer responsiveness to price changes, while demand elasticity measures consumer responsiveness. Supply is generally more elastic in the long run.
Q4: Can supply elasticity be negative?
A: Typically no, as higher prices usually encourage increased production. However, in rare cases (like backward-bending supply curves), it could theoretically be negative.
Q5: Why is supply often more elastic in the long run?
A: Producers have more time to adjust production capacity, acquire new technology, and enter or exit markets in the long run.