Question

the elasticity of supply is also influenced by the natural constraints in the production of a commodity .if we wish to produce more teak wood it will take years of plantation before it becomes usable.supply of teakwood will there fore be less elastic .

the elasticity of supply depends on the willingness of entrepreneurs to take risk .if the entrepreneurs are willing to take risk,the supply will be more elastic.on the other hand if entrepreneurs hesitate to take risk the supply will be inelastic .

perishable goods are relatively less elastic in supply than durables goods ,because it is difficult to store the perishables .

elasticity of supply is also influenced by cost of production if production is subject to law of increasing costs then supply of such goods will be inelastic .

please explain all the above situations with examples . ...i dont get the logic behind all the above statements

Answer 1

Elasticity of supply is responsiveness of quantity supplied to the price of the supplied product.

1.(the elasticity of supply is also influenced by the natural constraints in the production of a commodity .if we wish to produce more teak wood it will take years of plantation before it becomes usable.supply of teakwood will there fore be less elastic .)

THIS STATEMENT SAYS THAT SUPPLY CANT ALWAYS BE INSTANT LIKE THAT OF A PRODUCTION OF SOME BISCUIT SAY, OREO. THEN IT IS EASIER FOR ITS PRODUCER TO VARIATE IT'S SUPPLY ACCORDING TO DEMAND BECAUSE ALL FACTORS OF PRODUCTION ARE READILY AVAILABLE AND SUPPLY CAN VARIATE ACCORDING TO THE PRICE OF THE COMMODITY. BUT WHEN WE TALK ABOUT SUPPLY OF SOMETHING NATURAL SAY WOOD, THEN IT TAKES A LOT OF YEARS FOR A TREE TO GROW AND IT IS SAME FOR ALL THE PRODUCERS OF WOOD. HENCE, IN THIS CASE, NO MATTER WHAT THE PRICE OF WOOD IN THE MARKET IS, THE PRODUCER CAN NOT VARIATE ITS QUANTITY ACCORDING TO HIS WILL BECAUSE THE WOOD WILL TAKE AS MUCH TIME AS IT NEEDS TO GROW IRRESPECTIVE OF ITS MARKET PRICE.

2. (the elasticity of supply depends on the willingness of entrepreneurs to take risk .if the entrepreneurs are willing to take risk,the supply will be more elastic.on the other hand if entrepreneurs hesitate to take risk the supply will be inelastic .)

IF AN ENTREPRENEUR IS WILLING TO TAKE RISK OF NEW INNOVATION OR OF A NEW CAPITAL INVESTMENT, HE MAY PRODUCE A LOT OF QUANTITY AND CAN VARIATE IT ACCORDING TO THE MARKET PRICE OF THE COMMODITY. FOR EXAMPLE, IF A JUICE SELLER TAKES RISK OF PURCHASING NEW ADVANCED JUICER THEN HE MAY INCREASE HIS SUPPLY ACCORDING TO THE MARKET PRICE OF THE JUICE AND ACCORDING TO ITS DEMAND, BUT IF HE IS NOT ABLE TO TAKE RISK HE MAY NOT STRETCH HIS UPPER LIMIT OF SUPPLY, MAKING SUPPLY INELASTIC.

3 .elasticity of supply is also influenced by cost of production if production is subject to law of increasing costs then supply of such goods will be inelastic .

SUPPLY IS INFLUENCED BY THE COST OF FACTORS OF PRODUCTION. FOR EXAMPLE, A JUICE SELLER MAY NOT BE ABLE TO INCREASE THE SUPPLY ACCORDING TO THE MARKET PRICE OF JUICE AND ACCORDING TO ITS DEMAND IF THE COST OF FRUITS USED FOR JUICE MAKING IS UNAFFORDABLE FOR HIM. IN THAT CASE HE MAY NOT BE ABLE TO VARIATE THE SUPPLY OF JUICE AND THE SUPPLY OF JUICE WILL BECOME INELASTIC.