Microeconomics,, 16th Canadian Edition

(Sean Pound) #1

Supply elasticity is computed using average price and average quantity
supplied. Between points A and B, the elasticity of supply is 1.42. The
same approach shown here can be used to compute elasticity between
any two points on the supply curve.


As was the case with demand, care must be taken when computing
supply elasticity. Keep in mind that even though the supply curve may
have a constant slope, the measure of supply elasticity may be different at
different places on the curve. When supply is said to be elastic;
when supply is said to be inelastic.


Some important special cases need to be noted. If the supply curve is
vertical—the quantity supplied does not change as price changes—then
elasticity of supply is zero. A horizontal supply curve has an infinite
elasticity of supply: There is one critical price at which output is supplied
but where a small drop in price will reduce the quantity that producers
are willing to supply from an indefinitely large amount to zero. Between


ηS> 1 ,
ηS< 1 ,
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