It is about meaning & elasticity of supply, Degree and Factor affecting elasticity of suplly.

1. PRESENTATION
ELASTICITY
OF
SUPPLY

2. Definition Of Price Elasticity Of supply
• The change in the quantity
supplied of a product due to a
change in its price is known as
Price elasticity of supply.

3. Kinds Of Price Elasticity Of supply
1) Perfectly elastic supply
2) Relatively elastic supply
3) Elasticity of supply equal to utility
4) Relatively inelastic supply
5) Perfectly inelastic supply
Let Us See Some Views On Them

4. Perfectly elastic supply
P
R
I
C
E
y
Perfectly elastic
supply curve
S S
0 x
When the supply
for a product
changes –
increases or
decreases even
when there is no
change in price,
it is known as
perfect elastic
supply.

5. Relatively elastic supply
y When the
Relatively elastic supply
curve
P
R
I
C
E
0 supply x
proportionate
change in
supply is more
than the
proportionate
changes in
price, it is
known as
relatively elastic
supply.
S
S

6. Elasticity of supply equal to utility
Elasticity of
supply equal
to utility curve
y
0 x supply
P
R
I
C
E
When the
proportionate
change in supply
is equal to
proportionate
changes in price,
it is known as
unitary elastic
supply
S

7. Relatively inelastic supply
Relatively inelastic
supply curve
Y
O X
supply
P
R
I
C
E
When the
proportionate
change in
supply is less
than the
proportionate
changes in
price, it is
known as
relatively
inelastic supply
S
S

8. Perfectly inelastic supply
S
supply
Perfectly inelastic
supply curve
Y
0
X
P
R
I
C
E
When there is
no change in
the quantity
supplied with
the change in
its price, it is
perfectly
inelastic
supply
S

9. ALL KINDS OF supply CAN BE SHOWN IN
ONE DIAGRAM AS FOLLOW
S
S1
S5
Y
0 X
supply
P
R
I
C
E
WHERE
S1) Perfectly elastic
supply
S2)Relatively elastic
supply
S3)Elasticity of supply
equal to utility
S4)Relatively inelastic
supply
S5)Perfectly inelastic
supply
S5
S2
S3
S4

10. Measurement Of Price Elasticity Of
supply
There are two methods like
1. Percentage method or proportionate
method
2. Geometric method or point method

11. 1 Percentage method or proportionate method
• (Es) = % Change in Quantity Supplied
% Change in Price
• ES = ΔQ/ ΔP*P/Q
• ΔQ= change in quantity supplied.
• ΔP= change in price
• Q= initial quantity supplied.
• P= initial price of the good

12. Geometric method or point method
Es= Difference b/w Qty and intersect on X axis
Difference between Qty and origin

13. EXAMPLE
• Price of a good falls from Rs.15 to Rs.10 and
the supply decreases from 100 units to 50
units. Calculate Es.
• Q=100 P= 15
• Q1=50 P1=10
• Es= P/Q*ΔQ/ΔP = 15/100*50/5 = 1.5
• Es> 1, it is a case of elastic supply

14. (5) Factors Affecting Price
Elasticity Of supply

15. Factors Affecting Price Elasticity Of
supply
• Time Factor
1.Short period - relatively less elastic
2. Long period – more elastic
. Nature of the commodity
1. Perishable goods – relatively less elastic
2. Durable goods – elastic supply
. Technique of production
1. Complex technique - inelastic
2. Simple technique – elastic

16. .NATURE OF INPUTS USED
1.Commonly used factors – elastic
2.Specialised factors –inelastic
. Future price expectation
1.price increase- inelastic
2. price decrease – elastic
. Natural constraint
less elastic
. Risk Taking
1.Willing to take risk- more elastic
2. Unwilling to take risk- less elastic

17. (6) Practical Importance of the
Concept of Price Elasticity Of
supply

18. Practical Importance of the Concept of
Price Elasticity Of supply
• The concept is helpful in taking Business
Decisions
• Importance of the concept in formatting Tax
Policy of the government
• For determining the rewards of the Factors of
Production
• To determine the Terms of Trades Between
the Two Countries

19. Thanking You All