Question

What factors influence the price elasticity of supply for a good?

Answer 1

factors influencing the price elasticity of supply for a good are

• Price of the good
• Probability that the price would change in future
• Conditions regarding cost of production
• nature of the good
  length of time

Price of the good: The elasticity of supply of a good rely on the price of a good. The law of supply states that if the price of a good increases,the quantity of goods that the supplier offer would also increase and if the price of a good decreases, the quantity of goods that the supplier offer would also decrease.

Probability that the price would change in future: Suppose if the supplier believes that the price of the good will increase in near future then at present he would try to reduce the supply of that good or if he believes that the price of the good will decrease in near future then at present he would try to increase the supply of that good.

Conditions regarding cost of production: If the production cost of a good increases then quantity of goods supplied by the supplier would reduce or if the production cost of a good reduces then quantity of goods supplied by the supplier would increase. If the cost curve shift upwards then the supply curve will shift to the left and if the cost curve shifts downwards then the supply curve will shift to the right.

Suppose if there is a rise in production cost at a faster rate as the quantity of production of goods increases then in response to the rise in price the supply will increase at slower rate.

if there is a rise in production cost at a slower rate as the quantity of production of goods increases then in response to the rise in price the supply will increase at faster rate.

nature of the good: the nature of the good will depend on the supply.

length of time: if there is a rise in the price of good then by how much there will be rise in supply or by how high will the price elasticity of the supply be? this will depend on the length of the time available.