Factors Affecting Price Elasticity Of Supply
Economics notes
Factors Affecting Price Elasticity Of Supply
➡️ Availability of Substitutes: The availability of substitutes affects the price elasticity of supply. If there are many substitutes available, then the supply will be more elastic.
➡️ Time: The time period also affects the price elasticity of supply. If the time period is short, then the supply will be more elastic.
➡️ Production Cost: The production cost also affects the price elasticity of supply. If the production cost is high, then the supply will be less elastic.
➡️ Number of Producers: The number of producers also affects the price elasticity of supply. If there are many producers, then the supply will be more elastic.
➡️ Nature of the Good: The nature of the good also affects the price elasticity of supply. If the good is perishable, then the supply will be more elastic.
What are the main factors that affect the price elasticity of supply?
The main factors that affect the price elasticity of supply include the availability of inputs, the time horizon, the degree of substitutability of inputs, the level of technology, and the degree of market competition.
How does the availability of inputs affect the price elasticity of supply?
The availability of inputs refers to the ease with which producers can obtain the resources needed to produce a good or service. When inputs are readily available, producers can increase their output quickly in response to changes in price, making supply more elastic. Conversely, when inputs are scarce or difficult to obtain, producers may not be able to increase output as easily, making supply less elastic.
Why is the time horizon an important factor in determining the price elasticity of supply?
The time horizon refers to the length of time it takes for producers to adjust their output in response to changes in price. In the short run, producers may not be able to adjust their output quickly, making supply less elastic. However, in the long run, producers can make changes to their production processes or invest in new technology, making supply more elastic. Therefore, the time horizon is an important factor in determining the price elasticity of supply.