Elastic supply, Managerial Economics

Assignment Help:

Elastic Supply

Supply is said to be price elastic if changes in price bring about changes in quantity supplied in greater proportion.  Thus, when price increases, quantity supplied increases in greater proportion.  The supply curve is not steeply sloped and the elasticity of supply is greater than one.

When price rises from P1 to P2, quantity supplied rises in greater proportion from q1 to q2.  This is the case when there are a lot of stocks of the commodity or the commodity can be produced within fairly short period of time so that when price rises, quantity supplied can be increased substantially.

Conversely, if price falls from P2 to P1, quantity supplied falls in greater proportion from q2 to q1.  This is the case of a commodity which is easily stockable e.g. manufactured articles.  When price falls, quantity supplied can be substantially reduced.  The commodity is then stored instead of being sold at a loss or for very reduced profit.


Related Discussions:- Elastic supply

Central characteristics of simon satisfying behaviour model, Q. Central cha...

Q. Central characteristics of Simon satisfying behaviour model? The pattern of policy commitments which result from the bargaining process can be seen to be a specification of

Profit maximization theory of business, critically analysis the profit maxi...

critically analysis the profit maximisation theory of business firm and illucidet the role of profit in business

The effect of this immigration on wages, An Economy consists of two regions...

An Economy consists of two regions, the North & the South. The short-run elasticity of labor demand in every region is -0.5. Labor supply is perfectly inelastic within both regions

Investment demand theory , In the national income analysis, investment ref...

In the national income analysis, investment refers to the value of than part of the aggregate output for any given time period which takes the form of construction of new structure

Policy conflicts, Policy conflicts In their attempts to achieve the po...

Policy conflicts In their attempts to achieve the policy objectives, governments often face what are called conflict of objectives.  These arise partly because unlike private

Determine the theory of consumer behaviour, Theory of consumer behaviour ...

Theory of consumer behaviour The role of customers in an economy is of significant importance because consumers spend most of their incomes on services and goods produced by fi

Indifference curves, Indifference curves In order to explain indiffere...

Indifference curves In order to explain indifference curves, we will again make the simplifying assumption that the consumer buys two goods, x and y. The table below gives

Social cost and benefits, iwant presentation on united postal services on s...

iwant presentation on united postal services on social cost and benefits

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd