Question

Define price elasticity of supply . How is it measured ?

Answer 1

Elasticity of supply may be defined as the degree of responsiveness of the quantity supplied of a commodity to change in its price.
Under this method, elasticity of supply is measured by dividing the percentage change in quantity supplied by percentage change in price.

$e_s=\frac{\text{Percentage change in quantity supplied}}{\text{Percentage change in price}}$
$=\frac{\Delta q/q\times 100}{\Delta p/p\times 100}=\frac{\Delta q_s}{\Delta p}.\frac{p}{q_s}$
$\therefore e_s=\frac{\Delta q_s}{\Delta p}\times \frac{p}{q_s}$

$\begin{array}{cc}p& q\\ 10& 100\\ 20& 200\end{array}$

$e_s=\frac{\Delta q_s}{\Delta p}\times \frac{p}{q_s}=\frac{100}{10}\times \frac{10}{100}=1$
Thus, supply is unit elastic.