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Home Elasticity of Supply Determinants/Factors of  Price Elasticity of Supply

Determinants/Factors of Price Elasticity of Supply:

 

The main determinants/factors which determine the degree of price elasticity of supply are as under:

          

(i) Time period. Time is the most significant factor which affects the elasticity of supply. If the price of a commodity rises and the producers have enough time to make adjustment in the level of output, the elasticity of supply will be more elastic. If the time period is short and the supply cannot be expanded after a price increase, the supply is relatively inelastic.

 

(ii) Ability to store output. The goods which can be safety stored have relatively elastic supply over the goods which are perishable and do not have storage facilities.

 

(iii) Factor mobility. If the factors of production can be easily moved from one use to another, it will affect elasticity of supply. The higher the mobility of factors, the greater is the elasticity of supply of the good and vice versa.

 

(iv) Changes in marginal cost of production. If with the expansion of output, marginal cost increases and marginal return declines, the price elasticity of supply will be less elastic to that extent.

 

(v) Excess supply. When there is excess capacity and the producer can increase output easily to take advantage of the rising prices, the supply is more elastic. In case the production is already up to the maximum from the existing resources, the rising prices will not affect supply in the short period. The supply will be more inelastic.

     

(vi) Availability of infrastructure facilities. If infrastructure facilities are available for expanding output of a particular good in response to the rise in prices, the elasticity of supply will be relatively more elastic.

 

(vii) Agricultural or industrial products. In agriculture, time is required to increase output in response to rise in prices of goods. The supply of agricultural goods is fairly inelastic. As regards the supply of manufactured consumer goods, it is comparatively easy to increase production in a short period.

 

Therefore, the supply of consumer goods is fairly more elastic; In case of supply of aero planes or any other heavy machinery, the supply is relatively inelastic as it takes time to manufacture heavy machinery.      

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
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Various Revenue Concepts
Price and output Determination Under Perfect Competition
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Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
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Monetary Economics and Public Finance
History of Money

 

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