Elasticity of market supply, Microeconomics

Elasticity of Market Supply

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• Perfectly inelastic short run supply arises when industry's plant and equipment are so fully utilized that new plants should be built to achieve greater output.

  • Perfectly elastic short run supply arises when the marginal costs(MC) are constant.

The World Copper Industry (in the year 1999)

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The Short Run World Supply of Copper

760_elasticity of market supply2.png

Producer Surplus in the Short Run

- Firms earn surplus on all but last unit of output.

- The producer surplus is sum over all the units produced of difference between market price of the good and marginal cost (MC) of production.

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* Producer Surplus in Short Run

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*  Observation

- Short run with the positive fixed cost

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Producer Surplus for the Market

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Posted Date: 10/12/2012 5:38:10 AM | Location : United States







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