Question

Use the concept of elasticity of supply to explain why antique furniture is so expensive.

Answer 1

Q) Ans:-

Step1)

The Supply's price elasticity(PeS) measures the sensitiveness to the supply of service or goods due to a change in prices in the market. The law of supply says that the supply of goodwill increase with the rise in prices and the supply of goodwill decreases due to a decrease in prices. So, there is a direct relationship between prices and supply. There are five types of PeS based on the nature of the commodity.

When there is no change in the supply of the quantity(Qs) due to a change in prices(P), then the price elasticity(Pe) is perfectly inelastic. Relatively inelastic supply would be when the change in the supply of quantity(Qs) changes less than the change in the price(P) of the commodity. Unit elastic supply is the one where a change in the supply of the quantity is the same as the change in prices. Relatively Price elasticity would be when the change in the supply of quantity would be larger than the price change. And the last, Perfectly elastic supply(es) is the supply where the supply of the quantity is infinite at a given price but the quantity will not be supplied at any other level of price. The nature of a good is the main determinant that influences the supply elasticity.

Step2)

Antique furniture is the pieces of items used to furnish the interiors. These are termed antiques because of their rarity, age, condition, and unique features which make them a collectable and desirable item. The customary definition for antique is that the item should be at least 100 years old and in the original condition. The supply of genuine antique furniture is inelastic because there is no addition to the production level of the furniture. The sellers of antique furniture can not decrease or increase the supply of furniture. The supply of antique furniture will remain constant at whatever price change occurs because the furniture cannot be produced in the same form and if produced then it would not be antique. Due to the sellers' perspective, the seller can charge any level of prices to make a profit as the demand will not change due to prices. This will make the product more expensive. So, the price elasticity of supply(PeS) would be 0 in this case which means it would be inelastic as there will be no change in the supply of the quantity due to change in prices.