Question

Write short note on the following:

Elasticity of supply.

Answer 1

Elasticity of supply, or price elasticity of supply, measures the responsiveness of the quantity supplied of a commodity to the change in its price. It assists us in knowing the magnitude of the change in supply due to the change in its price.

Algebraically, it is calculated as:

`"Es"= "Percentage Change in Quantity Supplied"/"Percentage Change in Price"`

= `(+)( (DeltaQ )/Q_1 xx 100)/((DeltaP)/P_1 xx 100)`

= `(+) (DeltaQ)/Q_1 xx P_1/(DeltaP)`

= `(+) (DeltaQ)/(DeltaP) xx P_1/Q_1`

Where:

ΔQ represents change in the quantity supplied i.e. (Q₂−Q₁)
ΔP represents change in the price i.e. (P₂−P₁)
P₁ represents the initial price
P₂ represents the final price
Q₁ represents the initial quantity supplied
Q₂ represents the final quantity supplied