Question

Explain how the supply curve changes as the elasticity of supply increases.

Answer 1

Price supply elasticity measures the responsiveness to the supply of a good or service following a shift in its market price. The supply of a good will improve when its price increases, according to fundamental economic theory. Conversely, when its price declines, the supply of a good will reduce. Demand also has price elasticity. This measures how responsive a price shift will affect the amount requested. Overall, price elasticity measures how much a product's supply or demand changes on the basis of a specified price change. Elastic implies that the item is deemed sensitive to modifications in price. Inelastic implies that the item is not pricing sensitive.

Delivery elasticity creates a quantitative connection between a commodity's supply and its price. Therefore, by using the notion of elasticity, we can express the numerical shift in supply with the shift in the cost of a commodity. Note that with regard to the other supply determinants, elasticity can also be calculated.

The main factor controlling a commodity's supply, however, is its price. Hence, we usually speak about supply price elasticity. The supply price elasticity is the ratio of the price percent change to the percentage change in a commodity's delivered amount.

Elastic products are generally regarded as products of luxury. An rise in the cost of an elastic good has a significant effect on consumption. The good is seen as something people are prepared to sacrifice to save cash. An instance of an elastic good is film tickets that are seen as entertainment rather than necessity.

For elastic demand, the demand drops when a product's price rises. The demand increases when the price declines. Usually, elastic products are luxurious items that people think they can do without. Forms of entertainment like going to the films or attending a sporting event would be an instance. A price shift can have a major effect on consumer trends as well as on economic profits. An rise in demand will boost profit and income for companies and businesses, while a reduction in demand will result in reduced profit and income.

For inelastic demand, an increase in cost does not significantly affect the general supply and demand of a product. Usually inelastic products consist of necessities such as food, water, housing, and petrol. Whether or not a product is elastic or inelastic is directly related to consumer needs and preferences. If demand is completely inelastic, the same amount of the item will be bought irrespective of the cost.