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Price Elasticity of Supply Formula:
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The Price Elasticity of Supply Coefficient (E_s) measures the responsiveness of the quantity supplied of a good to a change in its price. It quantifies how much the quantity supplied changes when the price changes by 1%.
The calculator uses the Price Elasticity of Supply formula:
Where:
Explanation: The coefficient shows the proportional change in quantity supplied resulting from a proportional change in price.
Details: Understanding supply elasticity helps businesses and policymakers predict how producers will respond to price changes, plan production schedules, and make informed decisions about pricing strategies and market interventions.
Tips: Enter the percentage change in quantity supplied and percentage change in price as decimal numbers (e.g., 10% as 10, 5.5% as 5.5). The price change cannot be zero.
Q1: What do different elasticity values mean?
A: E_s > 1 = elastic supply, E_s < 1 = inelastic supply, E_s = 1 = unit 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: How is this different from price elasticity of demand?
A: Supply elasticity measures producer responsiveness to price changes, while demand elasticity measures consumer responsiveness.
Q4: Can supply elasticity be negative?
A: Typically no, as higher prices usually encourage increased supply. Negative values may indicate calculation errors or unusual market conditions.
Q5: How does time affect supply elasticity?
A: Supply becomes more elastic over time as producers have more opportunity to adjust production levels and capacity.