Price elasticity of supply refers to the degree of responsiveness of supply of a commodity concerning change in the price of such commodity. Here are the price elasticity of supply class 11 notes.
There are 2 methods for calculating elasticity:
1) Percentage Method
2) Proportionate Method
Topics Discussed
Percentage Method
Es = % Change in Quantity Supplied/ % Change in Price
Here:
% Change in Qs = delta Q/Q * 100
delta Q = Q1-Q
% Change in Price = delta P/P * 100
delta P = P1-P
Proportionate Method
Es = delta Q/Q * P/delta P
Here:
Q1 = New quantity
Q = Old quantity
P1 = New price
P = Old price
The elasticity of supply will have a positive sign as against the negative sign of the elasticity of demand. It happens because of the direct relationship between price and quantity supplied.
Kinds of Elasticity of Supply
There are five kinds of Price elasticities of Supply:
1) Perfectly Elastic Supply
When there is an infinite supply at a particular price and the supply becomes zero with a slight fall in price, then the supply of such commodity is said to be perfectly elastic.
In such a case Es is equal to infinity and the supply curve is a horizontal straight line parallel to the x-axis.
| Price (in Rs.) | Supply (in Units) |
| 30 | 100 |
| 30 | 200 |
| 30 | 300 |
Elasticity of Demand Class 11 Notes
2) Perfectly Inelastic Supply
When the supply does not change with a price change, then the supply for a commodity is said to be perfectly inelastic.
In such a case, Es = 0 and the supply curve is a vertical straight line parallel to the y-axis.
| Price (in Rs.) | Supply (in Units) |
| 20 | 20 |
| 30 | 20 |
| 40 | 20 |
3) Highly Elastic Supply
When the percentage change in quantity supplied is more than the percentage change in price, then supply for such a commodity is said to be highly elastic.
In such a case, Es>1, and the supply curve has an intercept on the y-axis.
| Price (in Rs.) | Supply (in Units) |
| 10 | 100 |
| 15 | 200 |
4) Less Elastic Supply
When the percentage change in quantity supplied is less than the percentage change in price, then supply for a commodity is said to be less elastic.
In such a case, Es<1, and the supply curve has an intercept on the x-axis.
| Price (in Rs.) | Supply (in Units) |
| 10 | 100 |
| 15 | 120 |
5) Unitary Elastic Supply
When the percentage change in quantity supplied is equal to the percentage change in price, then supply for such a commodity is said to be unitary elastic.
In such a case, Es=1, and the supply curve is a straight line passing through the origin.
| Price (in Rs.) | Supply (in Units) |
| 10 | 100 |
| 15 | 150 |
Practical Question on Es
Question: If the price of a commodity falls from Rs. 60 per unit to Rs. 58 per unit, its supply falls from 400 units to 300 units. Find out the elasticity of supply.
Solution: Q =400 units ; P = Rs. 60
Q1 = 300 units ; P1 = Rs. 58
delta Q = 100 units ; delta P = Rs. 2
Price elasticity of supply = delta Q/Q * P/delta P
= 100/400 * 60/2
= 7.5
Es = 7.5
Supply is highly elastic as Es>1.
Time Period and Supply
The supply of a commodity cannot be changed overnight. It takes time to change the supply. From the viewpoint of supply, time has been broadly divided into three periods:
- Market Period(Very Short Period): A market period refers to a very short period in which the supply cannot be changed in response to the change in demand. The supply curve is perfectly inelastic.
- Short Period: A short period refers to a period in which output (supply) can be changed by changing only variable factors. The supply curve is less elastic.
- Long Period: A long period refers to a period in which output (supply) can be changed by changing all factors of production. The supply curve is highly elastic.