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Home Elasticity of Supply Categories/Types of Price Elasticity of Supply

Categories/Types of Price Elasticity of Supply:

 

Definition and Explanation:

 

There are five degrees of price elasticity of supply:

 

(1) Infinitely Elastic Supply:

 

When the amount supplied at the ruling price is infinite, we say the supply is infinitely elastic. An infinitely elastic supply curve is a horizontal straight line as is shown in the figure 7.1.

 

Diagram/Figure and Example:

 

 

In this diagram 7,1, when the price is OP, the producer supplies an infinite amount of goods if the price falls slightly below OP then nothing will be supplied by him.

 

(2) Elastic Supply:

 

When the percentage change in the amount of a good supplied is greater than the percentage change in price that generated it. the supply is then said to be elastic supply.

 

For example, if the price of oranges increases from $5 to $6 and the quantity supplied rises from 150 to 600 oranges, the supply will be elastic.

 

 

In the diagram 7.2 SS/ supply curve is elastic and the numerical value for elasticity is greater than 1.

 

(3) Unitary Elasticity:

 

When the percentage change in the quantity supplied is exactly equal to percentage change in price that evoked it, the supply is said to have elasticity equal to unity, the elasticity of supply is equal to 1.

 

 

In the diagram 7.3 SS/ supply curve drawn through the origin has unit elasticity of supply.

 

(4) Inelastic Supply:

 

When the percentage change in the quantity supplied is less than the percentage change in the price that generated it, the supply is said to be inelastic. The inelasticity of supply is less than 1.

 

 

In this figure 7.4 SS/ supply curve (which is steeper than the elastic supply curve) shows that with a significant change in price, the quantity offered for sale is not very much affected.

 

(5) Perfectly Inelastic Supply:

 

In perfectly inelastic-supply, the quantity supplied does not change as price changes. The elasticity of supply in other words is zero.

 

For example, if the price of a painting by an artist who has died, rises from $10 thousand to $50 thousand, the supply of the painting cannot be increased. Diagram 7.5 shows the perfectly inelastic supply.

 

Relevant Articles:

Price Elasticity of Supply
Categories of Price Elasticity of Supply
Determinants of Price Elasticity of Supply
Measurement of Elasticity of Supply
 

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Rent
Wages
Interest
Profits
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance
History of Money

 

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