Question

How can you determine the elasticity of supply at any point on a non-linear supply curve? Explain with the help of a diagram.

Answer 1

The geometric measurement of supply elasticity at a location on the straight line supply curve was previously discussed. However, the same general idea and procedure are applied if we wish to measure elasticity at a location on a non-linear (curve type) supply curve. A tangent is drawn at any point along the non-linear supply curve. The tangent at that specific location represents the supply elasticity. In Fig., this is explained. It is necessary to determine supply elasticity at point K on the supply curve SS in Figure. On the supply curve, we draw a tangent t at point K. The tangent is continued to A, where it meets the X-axis. The supply curve's slope and the tangent t t's slope are equal at point K. Consequently, at point K on the supply curve, the elasticity of supply equals `(AB)/(OB)`. The supply elasticity in this case is less than unitary as AB is smaller than OB. Similarly, by drawing a tangent to any other point on the supply curve, we can estimate the point elasticity at that location.

The elasticity of supply is less than unity at any point on a supply curve where the tangent contacts the X-axis. The elasticity of supply at the point of tangency equals unity if the tangent crosses the origin. Elasticity of supply is greater than unity if the tangent crosses the X-axis to the left of the point of origin (O).