Unit elasticity of supply, Managerial Economics

Unit Elasticity of Supply

Supply is said to be of unit elasticity if changes in price bring about changes in quantity supplied in the same proportion.  Thus, when price rises, quantity supplied increases in the same proportion, and when price falls, quantity supplied falls in the same proportion.  The supply curve is a straight line through the origin, and the elasticity of supply is equal to one or unity.

When price rises from P1 to P2, quantity supplied increases in the same proportion from q1 to q2.  This is the case of a commodity of which there is a fair amount of stocks or which can be produced within a fairly short period of time.

Conversely, when price falls from P2 to P1, quantity supplied falls in the same proportion from q2 to q1.  This is the case of a commodity which is fairly easily stockable, e.g. dry foods, like dry beans and dry maize.

Posted Date: 11/27/2012 6:50:25 AM | Location : United States







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

Write discussion on Unit elasticity of supply
Your posts are moderated
Related Questions
What is Cyert and March's behavior theory? What are the demerits.

Functions of the Budget The budget fulfils three main functions: To raise revenue to meet government expenditure The government of a country provides certain se

Suppose that in an isoquant mapping, you should consider three isoquants with 1000, 2000 & 3000 units of output. The price of capital is Rs 2 a unit, and the price of labor is Rs 1

Discuss the full cost pricing and marginal cost pricing method. Explain how the two  methods differ from each other.

PHILLIPS CURVE   The Phillips  curve,  named  after  A.  W.  Phillips,  describes  the  relationship between unemployment  and  inflation. In  1958  Phillips, then  professor a

determine points in units and reorder quantity normal sales=2 month; reorder time=15days; max stock=6 units; safety stock=1 unit ( based on 95% customer''s satisfaction )

Structural unemployment    Caused by structural changes such that there exist: Cyclical unemployment : During depression, prices are too low and profit margins remain d

Let there be two consumers A and B, each buying at most two units of a good. A values having one unit at £10 and having two units at £12 whereas B values having one unit at £8 and

list all profession which generate personal income

A toy manufacturer makes output according to the production function: where n is the number of workers employed by the firm, O is a technological parameter and g the worker