Price elasticity of supply - Economics - AS Level

Price elasticity of supply - Economics - AS Level

Publicated on Apr 4, 2016 - Give your opinion

Register and download this free lesson of AS level Economics about price elasticity of supply to see the complete document.

Questions at the end will help you validate your understanding of the subject matter.

The assumption would be that if the price of a good increases, firms should always want to increase supply by as much as possible as this would make them the most profit possible.

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Content of this document of Sciences > Business studies

Availability of Substitutes, Ease of Substitution of Factors of Production.

If a firm is producing a good with many substitutes then lots of other firms in the market will be producing similar goods.

Time

Over time, firms can acquire the knowledge, human and physical capital and any other resources needed. They can then start producing these goods and react quicker when prices change, making them more price elastic.

Completely Price Inelastic to Supply

The diagram above illustrates the case when the price elasticity of supply is completely inelastic, or numerically equal to zero.

Technology

Better communication can mean changes get made quicker in larger organisations so firms can become more price elastic and increase output quicker as the profit incentive arises.

Regulation

This is both time consuming and costly to firms, so only firms with lots of initial capital can enter and hence the overall market supply does not increase significantly.


1 comment


RickyCugi
RickyCugi
Posted on Oct 17, 2016

Amazing!

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