There are various factors which affect the price elasticity of supply. The figure indicates the degree of responsiveness of supply to a change in price. The price elasticity of supply (PES) is the measure of the responsiveness in quantity supplied (QS) to a change in price for a specific good (% Change QS / % Change in Price). Factors Affecting the Price Elasticity of Demand | Economics The following points highlight the seven main factors affecting the price elasticity of demand. #1 Time: If there are a lot of producers, the easier for the industry to increase the output and cause the price increase. The price elasticity of supply (PES) is measured by % change in Q.S divided by % change in price. Period of Time: Time is the most significant factor which affects the elasticity of supply. Determinants/Factors of Price Elasticity of Supply: ... Time is the most significant factor which affects the elasticity of supply.
Factors Influencing PES: The following are the main factors which influence the price elasticity of supply: Time Period. A PES of 2.6, for example, means that a 1% rise in price will cause a 2.6% extension in supply. Conditions Regarding Cost of Production 4. If producers have enough time and resources to expand the level of supply of commodity when price rises, the supply will be elastic and vice versa. There are numerous factors that directly impact the elasticity of supply for a good including stock, time period, availability of substitutes, and spare capacity. The factors are: 1. Hence, we got a positive value here. Also the coefficient of price … Therefore, the price elasticity of the goods when price changes from $4 to $5 are 0.8. The price of gasoline is elastic. Nature of the Good 2. If demand increases, the industry will increase production to meet it. Price of the Good: The supply and elasticity of supply of a good depend upon the price of the good. The higher the figure, the more responsive supply is. As discussed earlier, the price elasticity of demand of a product reflects the change in the quantity demanded as a result of a change in price. Factors that affect the Elasticity of supply. Thus when the price of a commodity is relatively high, the producers are likely to be supplying near the limits of their capacity and would, therefore, be unable to make much response to a still higher price. When the price is relatively low, however, producers may well have surplus capacity which a higher price would induce them to use. The first factor that affects the determinants of price elasticity of supply is the number of producers. Price elasticity of supply measures the responsiveness of quantity supplied to a change in price. That is, consumers must buy it no matter what the price is. Factors # 1. This is the law of supply. If the price of a cappuccino increases by 10%, and the supply … Less Elastic Supply For a less elastic supply, the percentage change in quantity supplied is smaller than the percentage change in price. Factors Affecting Price Elasticity of Supply. Factors affecting price elasticity of demand.
Air travel and train travel are weak substitutes for inter-continental flights but closer substitutes for journeys of around 200-400km e.g. Its supply is also elastic. Using at least 250 words, list and describe three factors that would cause the price elasticity of supply to become more elastic. However, the price elasticity differs for different products as it depends on various factors. Determinants / Factors affecting Elasticity of Supply: 1. As supply and price are directly related, PES is a positive figure. Period of Time: Time is the most significant factor which affects the elasticity of supply.
E s >1 and the supply curve has an intercept on the Y-axis or a negative intercept on the X-axis.
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