Inelastic supply, Managerial Economics

Inelastic Supply

Supply is said to be price inelastic if changes in price bring about changes in quantity supplied in less proportion.  Thus, when price increases quantity supplied increases in less proportion, and when price falls quantity supplied falls in less proportion.  The supply curve is steeply sloped and the elasticity of supply is less than one.

When price increases from P1 to P2, quantity supplied increases in less proportion from q1 to q2.  This is the case when there are limited stocks of the product or the product takes a long time to produce such that when price rises, quantity supplied cannot be increased substantially.

Conversely, if price falls from P2 to P1, quantity supplied falls in less proportion from q2 to q1.  This is the case of a commodity which is perishable and cannot be easily stored, e.g. fresh foods like bananas and tomatoes.  These are perishable but not so highly perishable as fresh fish.  When price falls, quantity supplied cannot be drastically reduced.

Posted Date: 11/27/2012 6:49:35 AM | Location : United States







Related Discussions:- Inelastic supply, Assignment Help, Ask Question on Inelastic supply, Get Answer, Expert's Help, Inelastic supply Discussions

Write discussion on Inelastic supply
Your posts are moderated
Related Questions
POPULATION SIZE AND DEMOGRAPHIC TRENDS a.      Changes in Population The people of a country are its consumers.  They provide the labour force for production.  A study of

INDIRECT TAXES These are imposed on an individual mostly producers or traders but they can be passed on to be borne by others usually the final consumers.  They can also be de

Liquidity and the multiple contraction of deposits Many of the instruments of monetary policy depend upon limiting liquidity, which has a multiple effect upon bank' deposits t

Internal and External factors of business operation External factors : A firm can't exercise any control over these factors. Thepolicies, plans and programmes of the firm m

International Commodity Agreements (ICAS) International Commodity Agreements (ICAS) represents attempts to modify the operation of the commodity markets so as to achieve vario

Statistical technique used to estimate economic variable Some statistical techniques are used to estimate economic variables of interest to a manager. In a number of cases, sta

Determinants of Demand Price elasticity of demand fluctuates from commodity to commodity. Whereas the demand of some commodities is highly elastic, demand for others is highly


Location problem in the plane: In Kent, the council to respond to the people and government needs, it decided to establish 3 community care homes. The towns are recorded with t

State the difficulties in the measurement of profit.