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WEEK 6
ELASTICITY OF SUPPLY; EQUILIBRIUM OF DEMAND AND SUPPLY
Content
- Elasticity of Supply
- Factors Determining Elasticity of Supply
- Determination of Equilibrium Price and Quantity
- Effects of Changes in Demand and Supply on the
Equilibrium Price and Quantity
Sub-topic One: Elasticity of Supply
Just as it is with demand, there also exists what we called Elasticity of Supply. Elasticity of Supply is the degree of responsiveness of the supply of a commodity to changes in price. If a change in price causes more than a proportionate change in supply, then supply is elastic. But if a change in prices causes a less than a proportionate change in supply, then supply is inelastic.
- Degrees of Elasticity of Supply
- Elastic Supply
- Inelastic Supply
- Unitary Elastic Supply
- The Two Abnormal Elasticity of Supply
- Perfectly Elastic Supply
- Perfectly Inelastic Supply
We shall illustrate all of these graphically, just as the case with demand
- Elastic Supply: This is when change in price causes more than a proportionate change in supply. It is illustrated thus: (see diagram)
- Inelastic Supply: This is when change in price causes less than a proportionate change in supply. It is illustrated thus: (see diagram)
- Unitary Elastic Supply: This is when change in price leads to the same proportional change in supply. It is drawn as follows: (see diagram)
- Perfectly Elastic Supply: This is when the quantities supplied remains constant irrespective of increase or decrease in price. It is drawn as follows: (see diagram)
- Perfectly Inelastic Supply: this is a situation in which suppliers supply all the quantities they have at the prevailing price, but no more at any price below or above it. It is also drawn as follows: (see diagram)
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