Select Page

Perfectly Elastic Supply: The supply curve is horizontal due to the quantity supplied does not affect with the price fluctuations.

As you know, elastic supply happens when a producer is willing to supply an unlimited quantity at a given price or higher, but none at a lower price.

A product has a perfectly inelastic supply when the quantity supplied is the same regardless of price. In other words, any change in the price of a good with unit elastic supply results in an equally proportional change in quantity supplied. When supply is more elastic than demand, consumers will bear more of the burden of a tax than producers will. The following equation can be used to calculate PES. Unit elastic supply is referred to as a supply that is perfectly responsive to price changes. Regardless of what the change in price is, the fraction will always equal 0 if the top of the fraction is zero, and thus the elasticity of land supply is zero - perfectly inelastic. Price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price. For example, if supply is twice as elastic as demand, producers will bear one-third of the tax burden and consumers will bear two-thirds of the tax burden. The product's supply curve is vertical. It is necessary for a firm to know how quickly, and effectively, it can respond to changing market conditions, especially to price changes. Supply elasticity of a good with unit elastic supply is 1 (unlike the demand curve, the supply curve is upward sloping; thus, the elasticity of unit elastic supply is simply 1). The firm can supply an unlimited amount of product at that price. Detailed Explanation: The Mona Lisa painting by Leonardo da Vinci has a perfectly inelastic supply curve. There is only one Mona Lisa painting, and it cannot be duplicated at any price. Perfectly elastic supply (e s = ∞): When supply of commodity expands (rises) or contracts (falls) to any extent without any change in its price; it is called perfectly elastic supply.

Elasticity of supply in …