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Price Elasticity of Supply Formula:
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Price Elasticity of Supply (E_s) measures the responsiveness of the quantity supplied of a good to changes in its price. It indicates how much the quantity supplied changes when the price changes by 1%.
The calculator uses the Price Elasticity of Supply formula:
Where:
Explanation: The formula calculates how responsive producers are to price changes. A higher elasticity indicates greater responsiveness of supply to price changes.
Details: Understanding supply elasticity helps businesses and policymakers predict how changes in market prices will affect the quantity of goods supplied, aiding in production planning and market analysis.
Tips: Enter the percentage change in quantity supplied and percentage change in price as decimal numbers. Both values are required and the price change cannot be zero.
Q1: What does different elasticity values mean?
A: E_s > 1 = elastic supply, E_s < 1 = inelastic supply, E_s = 1 = unitary elastic, E_s = 0 = perfectly inelastic, E_s = ∞ = perfectly elastic.
Q2: What factors affect supply elasticity?
A: Production time, availability of inputs, technology, storage capacity, and mobility of factors of production.
Q3: Why is supply usually more elastic in the long run?
A: Producers have more time to adjust production capacity, find new inputs, and implement technological changes.
Q4: How is this different from price elasticity of demand?
A: Supply elasticity measures producer responsiveness to price changes, while demand elasticity measures consumer responsiveness.
Q5: Can supply elasticity be negative?
A: Typically no, as higher prices usually incentivize increased production. Negative values may indicate calculation errors or unusual market conditions.