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
firms both in monopolistic and perfect competition tend to make normal profits but why do they criticize only monopolistic competition

Determine the Specific Place of demand The demand should relate to a specific market as well. For instance, every year in the town of Dehradun, demand for school bags is 4,000

In the short-run the firm can't modify or change overhead factors like equipment, plant and scale of its organisation. In the short-run output can be decreased or increased by chan

Explain Managerial economics according to Mote and Paul Haynes, Mote and Paul:  "Managerial economics refers to those characteristics of economics and its tools of analysis mos

State the Demand analysis Analysis of demand is assumed to forecast demand that is a basic component in managerial decision-making. Demand forecasting is of importance since

Function of Money Markets The money markets are the place where money is "wholesaled".  As such the supply of money and interest rate which are of significance to the whole ec

Michael was discussing the importance of production analysis and cost analysis to managerial economics with a final year Open Campus student. The final year student, Catherine, sta

The following represents the section headers you should consider for your reasoned document.   Each section should have (at least) two research citations to support your work :

If the landfill described in Example had a compacted density of 600 Kg/m3 a refuse  depth of 9 m (29.5 ft), a moisture content of 20% by volume, and a 1-m  (3.25-ft)-thick clay cov

THE BALANCING ITEM Since for ever position entry in the current and capital accounts there is a corresponding negative entry in the monetary account, and for every negative en