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Question
Answer the following about 200 to 250 words
Explain various types of Price elasticity of Supply.
Solution
The following are the various types of price elasticity of supply.
i. Perfectly elastic supply - When the supply of a good is extremely responsive to the changes in the price, the supply of the good is said to be perfectly elastic. In this case, even a small change in the price leads to an infinite change in the supply. Here, Es= ∞.
ii. Perfectly inelastic supply - When the supply of a good is extremely unresponsive to the changes in the price, the supply of the good is said to be perfectly inelastic. In this case, In this case, irrespective of the change in the price, the supply of the good remains same and unchanged. Here, Es = 0.
iii. Unitary elastic - When the supply of a good is equally responsive to the change in the price, the supply of the good is said to be unitary elastic. In this case, the percentage change in the supply is equal to percentage change in the price. Here, Es =1.
iv. Relatively elastic supply – When the supply of a good is highly responsive to the changes in its price, the supply of the good is said to be relatively elastic. In this case, the percentage change in the supply is greater than the percentage change in the price. Here, Es >1.
e. Relatively inelastic supply - When the supply of a good is less responsive to the changes in its price, the supply of the good is said to be relatively inelastic. In this case, the percentage change in the supply is less than the percentage change in the price. Here, Es < 1.
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