Perfectly inelastic (zero elastic) supply, Managerial Economics

Perfectly Inelastic (Zero Elastic) Supply

Supply is said to be perfectly inelastic if the quantity supplied is constant at all prices.  The supply curve is a vertical straight line and the elasticity of supply is equal to zero.

When price rises from P1 to P2, quantity supplied stays fixed at q, and when price falls from P2 to P1, quantity supplied stays fixed.

In the case of a price rise, this is the situation of the very short-run or the momentary period which is so short that the quantity supplied cannot be increased, e.g. food brought to the market in the morning.  It is also the case where the commodity is fixed in supply e.g. land.  In the case of a price fall, this is the case of a highly perishable commodity which cannot be stored, e.g. fresh fish.

 

Posted Date: 11/27/2012 6:48:10 AM | Location : United States







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