Editing Content :: Admin Scraper

Chapter

Content type

Position

Value

P − P = 2 1 ×100 P1 30 1− = 10 ×100 = 200 400 Therefore, price elasticity of supply, e = = 2 S 200 When the supply curve is vertical, supply is completely insensitive to price and the elasticity of supply is zero. In other cases, when supply curve is positively sloped, with a rise in price, supply rises and hence, the elasticity of supply is positive. Like the price elasticity of demand, the price elasticity of supply is also independent of units. The Geometric Method Consider the Figure 4.14. Panel (a) shows a straight line supply curve. S is a point on the supply curve. It cuts the price-axis at its positive range and as we extend the straight line, it cuts the quantity-axis at M which is at its negative range. The price elasticity of this supply curve at the point S is given by the ratio, Mq 0Oq . 0or any point S on such a supply curve, we see that Mq >Oq . 0 0 The elasticity at any point on such a supply curve, therefore, will be greater than 1. In panel (c) we consider a straight line supply curve and S is a point on it. It cuts the quantity-axis at M which is at its positive range. Again the price elasticity of this supply curve at the point S is given by the ratio, Mq /Oq . 0 0 Now, Mq < Oq and hence, e < 1. S can be any point on the supply curve, 0 0 S and therefore at all points on such a supply curve e < 1. S Now we come to panel (b). Here the supply curve goes through the origin. 66 One can imagine that the point M has coincided with the origin here, i.e., Mq 0 y c has become equal to Oq . The price elasticity of this supply curve at the t i 0 u o point S is given by the ratio, Oq /Oq0which0is equal to 1. At any point on a o o straight line, supply curve going through the origin price elasticity will be t eo I c one. i M Price Price Price p0 S p0 S p0 S q q O M q 0 M O 0 Output O 0 Output Output Fig. 4.14 (a) (b) (c) Price Elasticity Associated with Straight Line Supply Curves.Inpanel(a),priceelasticity (eS) at S is greater than 1. In panel (b), price elastiSity (e ) at S is equal to 1. In panel (c), price elasticity Se ) at S is less than 1. Reprint 2026-27