Question

In 2018, the Boston Red Sox won the World Series. The win increase fans demand for and willingness to pay a higher price for the team’s apparel. However, the merchandising manufacture could not initially meet the increase demand. Explain how after a price increase, time influences the elasticity of supply.

Answer 1

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Abstract

Supply elasticity is a measure of the responsiveness of an industry or a producer to changes in demand for its product. The availability of critical resources, technology innovation, and the number of competitors producing a product or service also are factors.

Elasticity of supply is a measure of a producer's ability to cope effectively with changes in demand. A number of factors can affect it.

• vailability of resources is a factor. If a company depends on an increasingly scarce resource to produce its product, it may be unable to step up production when demand increases. Moreover, the resource will become increasingly expensive, forcing a corresponding increase in the producer's price or decrease in its production, or both.
• Technology innovation is a factor in many industries. More efficient production reduces costs and allows for larger production numbers at lower prices.
• The number of competitors is a factor. An increase in the number of suppliers makes the price of a product or service more elastic. If one supplier can't meet demand, others will rush to fill the gap.
• Flexibility is a big factor. If a resource becomes scarce, can another resource be substituted Can production be ramped up quickly in response to greater demand? Efficient producers can respond more quickly to increased demand

Influence of Time in Elasticity of Supply

The amount of time it takes producers to respond to price changes is extremely important to the elasticity of supply. If the price of an output increases, and producers have time to adjust supply, supply will be more elastic. If producers are unable to respond to the price increase, the supply is inelastic. In the short-run, supply may be inelastic. However, given more time to respond, elasticity of supply may increase.

• For example, say that the price of pumpkins increases due to a popular pumpkin diet. Supply is going to be inelastic at first because it takes a great deal of time to grow more pumpkins. In the short-run, supply is inelastic, but over the long-run, supply becomes more elastic as farmers eventually produce more pumpkins.

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