Inelastic supply, Managerial Economics

Assignment Help:

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.


Related Discussions:- Inelastic supply

Short run production function, Explain the short-run production function wi...

Explain the short-run production function with one variable input with the help of assumed figures. Clearly indicate the three stages of physical product, using table and graphs.

Explain the shut down point, Q. Explain the Shut down point? ShutdownP...

Q. Explain the Shut down point? ShutdownPoint: With MR = MC, firm attains equilibrium at point E where it produces OM amount of the output. To produce this output, firm incur

MBA, Discuss whether Indian Consumer goods industry is growing at the cost ...

Discuss whether Indian Consumer goods industry is growing at the cost of future Profitability.

Type of economic system, Question 1: (a) Briefly explain and distingui...

Question 1: (a) Briefly explain and distinguish between a centrally planned, laissez-faire and mixed economy. (b) According to you, which kind of economic system is most d

Determine that the laws of economics still work today, (i) Do the laws of e...

(i) Do the laws of economics still work today? (use the case discussed in class to answer this question or any other examples) (ii) Provide examples of three factors that can sh

Occurrence of stagflation , Occurrence of Stagflation Two possible theo...

Occurrence of Stagflation Two possible theoretical explanations can be given for the occurrence of stagflation almost all over the world. The first explanation follows directly

Explain measuring arc elasticity, The concept of point elasticity is applic...

The concept of point elasticity is applicable where change in price and the resulting change in quantity are infinite or small. Though, where change in price and consequent hunger

Optimal input combination for maximisation of output, Q. Optimal Input Comb...

Q. Optimal Input Combination for Maximisation of Output? Equilibrium conditions of the firm are identical to the above situation which is, iso-cost line must be tangent to the

Knight theory of the profit, Frank H. Knight treated profit as a residual r...

Frank H. Knight treated profit as a residual return to uncertainly profit. Obviously knight made a distinction between risk and uncertainly he divided risk into calculable and non-

Shifts in demand curve, Shifts in demand curve Shifts in the demand cu...

Shifts in demand curve Shifts in the demand curve are brought about by the changes in factors like taste, prices of other related commodities, income etc other than the price

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