Question

Determinants of price elasticity of supply

Answer 1

The main determinants/factors which determine the level of price elasticity of supply are as under:

(I) Time period. Time is the most critical factor which influences the elasticity of supply. In the event that the price of a ware rises and the makers have enough time to influence change in the dimension of output, the elasticity of supply will to be more elastic. In the event that the time period is short and the supply can't be extended after a price increase, the supply is moderately inelastic.

(ii) Ability to store output. The products which can be wellbeing stored have moderately elastic supply over the merchandise which are transitory and don't have storage facilities.

(iii) Factor mobility. In the event that the factors of production can be effectively moved starting with one utilize then onto the next, it will influence elasticity of supply. The higher the mobility of factors, the more noteworthy is the elasticity of supply of the great and the other way around.

(iv) Changes in marginal cost of production. In the event that with the development of output, marginal cost increases and marginal return declines, the price elasticity of supply will be less elastic to that degree.

(v) Excess supply. At the point when there is excess limit and the maker can increase output effectively to exploit the rising prices, the supply is more elastic. In the event that the production is now up to the most extreme from the existing resources, the rising prices won't influence supply in the short period. The supply will be more inelastic.

(vi) Availability of infrastructure facilities. On the off chance that infrastructure facilities are accessible for expanding output of a specific decent in light of the ascent in prices, the elasticity of supply will be generally more elastic.

(vii) Agricultural or industrial products. In farming, time is required to increase output in light of ascend in prices of merchandise. The supply of agricultural merchandise is genuinely inelastic. As respects the supply of made purchaser merchandise, it is nearly simple to increase production in a short period.