In economics, the concepts of inelastic supply and perfectly inelastic supply are used to describe the responsiveness of the quantity supplied to changes in price. While both terms refer to situations where the supply of a good or service is unresponsive to price changes, they differ in the degree of responsiveness.
➡️1. Inelastic Supply: Inelastic supply refers to a situation where a change in price leads to a relatively smaller percentage change in the quantity supplied. In other words, the quantity supplied is not highly sensitive to price fluctuations. This is represented by a price elasticity of supply (PES) value of less than ➡️1. For example, if the PES is 0.➡️5, a ➡️➡️10% increase in price would result in a ➡️5% increase in the quantity supplied.
➡️2. Perfectly Inelastic Supply: Perfectly inelastic supply, on the other hand, occurs when a change in price has no effect on the quantity supplied. In this case, the supply curve is represented by a vertical line, indicating that suppliers are unable or unwilling to adjust the quantity supplied regardless of price changes. The PES value for perfectly inelastic supply is zero. For example, essential goods like life-saving medications may have a perfectly inelastic supply because their production cannot be easily increased or decreased in response to price changes.
In summary, inelastic supply means that the quantity supplied is not highly responsive to price changes, while perfectly inelastic supply implies that the quantity supplied remains constant regardless of price fluctuations. Understanding the elasticity of supply is crucial for analyzing market dynamics and assessing the impact of price changes on the behavior of suppliers.