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Factors Affecting Price Elasticity of Supply

Question

Analyse the factors that may make the supply of a product more price-elastic.

Category:

Elasticity

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Preview Answer

I. 🍃Introduction
- Explanation of the factors that can affect production period, time period available, storage, raw materials, mobility of factors of production, ability to source additional resources/output, and barriers to entry

II. Production period
- Advances in technology that can decrease production period
- Impact on quantity produced

III. Time period available
- Importance of longer time period for adjusting supply
- Benefits of having more time to adjust supply

IV. Storage
- Building of more storage facilities
- Easier to bring more products onto the market or withdraw them from the market

V. Raw materials
- Finding more sources of raw materials
- Greater flexibility of supply

VI. Mobility of factors of production
- Ability to substitute between products being produced
- Impact on production and supply

VII. Ability to source additional resources/output
- Importance of sourcing additional resources/output
- Retaining profit margins while sourcing additional resources/output

VIII. Lack of barriers to entry
- Importance of lack of barriers to entry
- Enabling new firms to enter the market

IX. 👉Conclusion
- Recap of the factors that can affect production and supply
- Importance of understanding these factors for businesses and industries.

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