Price Elasticity of Supply Formula

The price elasticity of supply measures the responsiveness of the quantity supplied and corresponds to a change in its price. In other words, the price elasticity of supply forms a quantitative relationship between the supply of a product and its price.

Businesses need to have this information as they need to know how quickly and effectively, they can adapt to the changing market conditions. This is especially applicable in price changes.

The major factor that contributes to the supply of commodities is the price. Therefore, the price elasticity of supply is said to be the percentage change in the quantity supplied by the percentage change in the price.

The price elasticity of supply formula can be represented as:

Price elasticity of supply = % change in quantity supplied/% change in price

Types of price elasticity of supply

  1. Perfectly inelastic: This is the situation where only one quantity of product is supplied at any price.
  2. Perfectly elastic: In this situation, the supply is infinite at any change in price.
  3. Unitary elastic: It is shown as a linear supply curve, which means that the change in price and supply is equal to each other. Therefore, the elasticity of supply is one.

This completes the topic on the price elasticity of supply formula, which helps form a clear understanding of the concept of price elasticity. To read more such interesting concepts on economics for class 12, stay tuned to our website.

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