Price Elasticity of Supply

Definition

Price elasticity of supply measures the responsiveness of the quantity supplied of a commodity/service to a change in the price of the commodity/service. It is expressed as a ratio of the percentage change I quantity supplied to the percentage change in the commodity’s own price.

\(E_s = \cfrac{\text{percentage change in quantity supplied}}{\text{percentage in price}}\)

Types of Price Elasticity of Supply:

1) Elastic Supply:

Supply for a good is price elastic if a given percentage change in price causes a greater percentage change in quantity supplied. The supply curve will exhibit a gentle slope.

2) Inelastic Supply:

Supply for a good is price inelastic if a given percentage change in price causes a lesser percentage change in the quantity supplied. The supply curve will exhibit a steep slope.

3) Unitary Elastic Supply:

Supply of a commodity is unit price elastic if a given percentage change in price causes an equal percentage change in the quantity supplied.

4) Perfectly Elastic Supply:

Supply is perfectly price elastic if the sellers are willing to offer all the available quantities for sale at the prevailing price only. Supply is then alternatively said to be infinitely price elastic. The supply curve is horizontal.

5) Perfectly Inelastic Supply:

Supply is perfectly inelastic if a change in price causes no change in supply. The supply curve is vertical and the price elasticity of supply coefficient is zero.

The various types or degrees of price elasticity of demand will attract the range of elasticity coefficients shown in the table below:

Range of Elasticity Coefficients

Types	Price Elasticity of Supply Coefficient (\(E_s\))
Elastic	\(1 < E_s < \infty\)
Inelastic	\(0 < E_s < \infty\)
Unitary	\(E_s = 1\)
Perfectly Elastic	\(E_s = \infty\)
Perfectly Inelastic	\(E_s = 0\)