Factors determine the price elasticity of supply, Microeconomics

Factors determine the price elasticity of supply:

The price elasticity of supply varies widely across different products. Some products have more leastic supply, while others have less elastic supply. The major factors that determine price elasticity of supply are:

(i)The Availability and Mobility of Factors of Production
 
If factors of production are available then supply response quickly and largely to a change in the price of a product (i.e. supply then tends to be more elastic), but less elastic (inelastic) when factors of production are not available. The more easily factors can be transferred from the production of one good to that of another, the greater the elasticity of supply.

(ii)Influence of the weather

If output is controlled by weather conditions, as in the case of agriculture products, the output cannot be controlled by the producer. Hence the supply of such product tends to be less elastic (inelastic).

(iii)The Level of Technology

The extend to which output can be increased depends on the level of technology employed by the producer. Advanced technology used in production tends to make the supply of a product more elastic.

(vi)Cost of production

If the cost involved the production of a product is very high, output cannot be easily increased when the market price increases unless the icrease in price is great enough to absorb the cost.

(vii)Degree of perishability

The supply of highly a perishable commodity is relatively inelastic and that of a less perishable commodity is relatively elastic. The explanation is that highly perishable goods cannot be stocked for longer period to be relased when price for instance rises.

(viii)Time (Gestation Period)

Supply elasticity tends to be greater in the longer period. The longer the period, the easier it is to shift factors of production among products, following a change in their relative prices. This holds for agricultural products, becasue of the natural time lag between planting and harvesting of crops. In the short-run, the supply of most products tends to be relatively inelastic.

Posted Date: 1/2/2013 7:08:02 AM | Location : United States







Related Discussions:- Factors determine the price elasticity of supply, Assignment Help, Ask Question on Factors determine the price elasticity of supply, Get Answer, Expert's Help, Factors determine the price elasticity of supply Discussions

Write discussion on Factors determine the price elasticity of supply
Your posts are moderated
Related Questions
Processors of aseptically packaged juice-based beverages must adequately heat their product before packaging it in order to be sure that they have “killed” the microorganisms which

what is the significance of the Loucas critique in political economy?

Q. Market Income and Socialism? Market Income: A household's total pre-tax income obtained from its activities in formal economy, including salaries andwages, investment income

1. Suppose that a monopolistically competitive firm must build a production facility in order to produce a product.  The fixed cost of this facility is FC = $24.  Also, the firm ha

Assume there is a remote area in china with high population.The area is composed exclusively of apartments and is populated by low-income residents .The people tend to stay in that

"price is becoming cheaper,yet the demand for car is not rising".does it mean law of demand is not operative?

Questions (i)   You are an industry analyst. Last year, the production cost of Microprocessor increased remarkably due to labor unionization. Nevertheless, the industry experie

Public Administration: According to L.D. White, "Public administration consists of all those operations having for their purpose the fulfillment or enforcement of public polic

Learning curve implies:  1) The requirement of labor falls per unit.  2) Costs will be high at 1 st and then will fall with learning.  3) After eight years the labor requ

Question : (a) Using a simple example, diffrence between inter - industry trade and intra - industry trade? (b) Illustrate the reasons for the existence of external economie