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
State about Managerial economics Managerial economics is a discipline which is designed to facilitate a solid foundation of economic understanding for business managers and al

Q. Describe about Theory of Firm? Theory of the firm is associated to comprehending how firms come into being, what are their objectives, how they act and enhance their perform

when firm can achieve optimization

Milton Friedman makes the demand for money a function of the real per capital permanent income. in this study the demand function for money is stated as; M/NPP= r( YP/NP) δ W

Explain the Theory of Production Cost and Production analysis is central for the unhampered functioning of the production process and for project planning. Production is an e

ChoppinAxe is a little Swedish firm that produces wood planks and operates in a perfectly competitive market. Each firm in the market has the following total cost function:

Dan and Ann are chemical engineers working for a biotech company. Each of them would like to be promoted to a managerial position, but only one of them can get the job. Their super

CAPITAL MARKETS Markets in which financial resources (money, bonds, stocks) are traded i.e. the provision of longer term finance - anything from bank loans to investment in pe

MONOPOLISTIC PRACTICES The following practices may be said to characterize monopolies. Exclusive dealing to supply and collective boycott Producers agree to supply onl