Question

State the degrees of elasticity of supply.

Answer 1

To describe the various degrees of price elasticity of supply, economists have grouped them into five categories:

1. Perfectly Elastic Supply: A situation known as infinite or fully elastic supply occurs when a very slight change in price results in an infinite response from the amount of an item provided. It describes a scenario in which any quantity will be provided at the going rate, but nothing will be provided at a reduced cost.
   
   We have drawn a horizontal, straight supply curve S1 that is infinitely elastic and parallel to the X-axis. At price OP, it exhibits infinite elasticity, indicating that sellers are willing to sell an infinite amount of a good at that price and that no supply would be made at a somewhat lower price. Here, the supply's elasticity is infinite (∞). This is a severe instance of supply elasticity. Although it is rarely used in real-world settings, it is a highly helpful benchmark.
2. Perfectly Inelastic Supply: Perfectly inelastic supply is another extreme example of supply elasticity, where no supply response occurs regardless of how much the price changes. In this instance, a change in price has no effect on the amount of a commodity delivered. There is no price elasticity. One example of such a supply curve is supply curve S₂ in the provided figure.
   
   This supply curve, which parallels the Y-axis, demonstrates that, regardless of price, the quantity provided of an item stays out of quantity (OQ). The elasticity of supply is 0 in this instance. Stamps, coins, antique artworks, and so on are examples of perfectly inelastic supplies. The Mona Lisa, for instance, is a single painting. Even one additional Mona Lisa painting cannot be purchased for a higher price.
3. Unitary Elastic Supply: When the percentage change in a commodity's quantity supplied is precisely equal to the percentage change in its price, this is known as unitary elasticity of supply. In this instance, the supply elasticity will have a numerical value of 1.
   
   The supply curve with unitary elasticity is depicted in the figure. Regardless of its slope, the elasticity of any straight line supply curve that passes through the origin is unity throughout. As a result, unitary elasticity is present at every point in the supply curves S₃ and S₄.
4. Elastic Supply: When the percentage change in a commodity's quantity provided exceeds the percentage change in its price, the supply is said to be elastic. In this instance, the amount delivered is comparatively more sensitive to price fluctuations. Price elasticity will have a numerical value greater than 1.
   
   Fig. shows an elastic supply curve S₅. Anywhere on this supply curve S₅ the elasticity is greater than unity, though the particular numerical value of elasticity will vary along the curve. In fact, any straight-line supply curve that cuts the Y-axis has elastic supply all through.
5. Inelastic Supply: An elastic supply curve S₅ is displayed in Fig. Although the specific numerical value of elasticity will vary along the supply curve S₅, elasticity is greater than unity everywhere on the curve. In actuality, elastic supply is present across any straight line supply curve that crosses the Y-axis.
   
   In this instance, supply elasticity is less than 1. An inelastic supply curve S₆ is depicted in Fig. Elasticity is below unitary everywhere along this supply curve. Elasticity is always less than 1, but it varies along the supply curve. There is inelastic supply throughout any straight-line supply curve that crosses the X-axis.