Economics

Elasticity of Supply: Types of Supply Elasticity

len Alfred Ajibola - Tue, 07th January, 2020 @ 22:10: PM

Topics in Economics

Advantages of Inflation Disadvantages of Inflation Concept of Inflation in Economics Scheme of work for Economics, SS1, First Term Scheme of work for Economics, SS1, Second Term Scheme of Work for Economics, SS1, Third Term Functions of the Wholesaler Advantages and Disadvantages of the Wholesaler Wholesale Market: Who is a Wholesaler? Characteristics of the Wholesaler Retail Market: Who is a Retailer and Examples of Retailers Market: Types of Market Market - What is a Market in Economics? Elasticity of Supply: Types of Supply Elasticity Supply Elasticity: Elasticity of Supply explained Demand Schedule - Types of Demand Schedule Demand: What is Demand? Law of Demand Concept and Types of Cost Supply, Supply Curve and Law of Supply What is a Black Market, Its advantages and disadvantages


Academic Questions in Economics

Please check out our Test Your Knowledge page to see all Questions and Answers

A _____ market provides a platform whereby job seekers link up with employers in an attempt to be hired.

  • A. Wholesale market

  • B. Bond market

  • C. Physical market

  • D. Virtual market

  • E. Factor Market

  • F. Labor Market

Which of the following is not a type of market based on commodities bought and sold?

  • A. Wholesale market

  • B. Bond market

  • C. Physical market

  • D. Virtual market

  • E. Factor Market

  • F. Labor Market

According to economists, a market refers to a/an _____ comprising of various buyers and sellers carrying out business transactions.

  • A. Place

  • B. Location

  • C. Entire area

  • D. Online platform

  • E. Avenue

  • F. Axis

Primary market is a type of market based on _____.

  • A. Market structure

  • B. Demand

  • C. Supply

  • D. Commodities bought and sold

  • E. Channel of distribution

  • F. Internet and world wide web

Pice elasticity of supply - Len Academy

The above diagram on the quantity supplied against a change in price is _____.

  • A. Elastic

  • B. Inelastic

  • C. Perfectly Elastic

  • D. Perfectly Inelastic

  • E. Zero Elastic

  • F. Unitary Elastic

The rate at which an increase in the price of a product translate into the product's increased production and availability in the market is termed _____.

  • A. Demand

  • B. Supply

  • C. Demand Elasticity

  • D. Supply Elasticity

  • E. Demand Curve

  • F. Supply Curve

Concerning demand curve, which of the following statement is incorrect?

  • A. It is a graphical represention of a table showing the price of commodities and quantity demanded

  • B. It can be an individual demand curve

  • C. The x-axis shows the price of commodities

  • D. The price and quantity demanded are expressed on different axis of the graph

  • E. It can be a market demand curve

  • F. All the options are correct

A table that shows the price of a commodity and the quantity demanded is termed _____.

  • A. Price table

  • B. Demand table

  • C. Demanded-price table

  • D. Demand preference table

  • E. Demand graph

  • F. Demand schedule

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Types of Supply Elasticity:

Elasticity of Supply (or Supply Elasticity) refers to the rate at which an increase in price of goods translates into an increased production and availability of such goods in the market.

For all commodities, the value of Elasticity of supply (Es) is not always uniform. Its value may be:

Below are the 5 types of supply elasticity with their respective explanations and graphical representations:

 

1. Perfectly Inelastic Supply

A product is considered to be perfectly inelastic when a change in the price of the product has no effect on the production and amount (or supply) of such product in the market.

Please read on Supply, Supply Curve and Law of Supply here.

Below is a graph that shows a Perfectly Inelastic Supply:
Perfectly Inelastic Supply Curve - Len Academy

Note: Goods, services and commodities are said to be perfectly inelastic whenever a given quantity of it can be supplied, no matter the change in price.

Consider the instances below:

Instance 1: A 10% increase in the price of wheat translates into a 100% increase in the production and supply of wheat.

Instance 2: if a 100% increase in the price of wheat translates into a 100% increase (the same increase as above) in the production and supply of wheat, then the supply elasticity is said to be perfectly inelastic for wheat and its value becomes zero (0) in both instances.

Perfectly inelastic goods, commodities or services are considered to have zero elasticity: (Es = 0).

The curve lies parallel and straight to the y axis of the graph.

Please read on the Graphical Representation of Supply Curve here.

 

2. Inelastic or Relatively Less-Elastic Supply

A supply curve is said to be inelastic when a change in price brings about a relatively less change in the quantity of goods or services supplied.

The graph below shows an Inelastic Supply Curve:
Inelastic and Elastic Supply Curve - Len Academy

Consider the instance below:

If a 100% increase in the price of melon translates into a 50% increase in the production and supply of melon, then the supply elasticity is inelastic and its value becomes 0.5 in this case. (That is; Change in Quantity supplied divided Change in Price).

The price elasticity of inelastic products are always given a value greater than 0 and lesser than 1.

Es > 0 and Es < 1.

Please read on Demand and Law of Demand here.

 

3. Elastic or Relatively Greater-Elastic Supply

Please see the graph of Elastic Supply above

An elastic supply is seen when a change in price brings about a relatively greater change in the quantity of goods or services supplied.

As an instance, If a 100% increase in the price of beans translates into a 200% increase in the production and supply of beans, then the supply elasticity is elastic and its value becomes 2 in this case. (Change in Quantity Supplied divided by Change in Price).

The price elasticity of elastic products are given a value greater than 1 and lesser than infinity.

Es > 1 and Es < ∞.

Please read on Demand Schedule here.

 

4. Unitary Elasticity or Unit Elasticity

A Unitary elasticity of supply is seen when a change in price brings about a corresponding and proportional change in the quantity of goods or services supplied.

The graph below shows a Unit Elasticity of Supply:
Unit Elastic Supply Curve - Len Academy

Below is an instance of a Unitary Elasticity of Supply:

If a 100% increase in the price of wheat translates into a 100% increase in the production and supply of wheat, then the supply elasticity is said to be unitary elastic and its value is equal to 1.

Unitary elasticity is always equal to 1, that is:

Es = 1

The supply curve runs diagonally and will pass through the center.

You can read on Scale of Preference and Opportunity Cost here.

 

5. Perfectly Elastic supply

A service or commodity is said to be perfectly elastic when an increase in price results in an infinite or unlimited rise in the quantity of commodities or services supplied. In this case, (ES = ∞).

The graph below shows a Perfectly Elastic Supply:
Perfectly Supply Curve - Len Academy

Please read on the Concept and Types of Cost here.

The instances below illustrate a perfect elasticity for the product (fertilizer):

Instance 1: A 10% increase in the price of fertilizer translates into an infinite increase in the production and supply of fertilizer.

Instance 2: if a 100% increase in the price of fertilizer translates into an infinite increase in the production and supply of fertilizer, then the supply elasticity is said to be perfectly elastic for fertilizer and its value becomes infinite (∞) in both instances.

You can read on Production here.

Note: Whenever there is a decrease in price, the supply of perfectly elastic commoditis or goods, their values become zero (0).

Consider the instances below:

Instance 1: A 10% decrease in the price of yam translates into a 0% increase in the production and supply of yam.

Instance 2: if a 100% decrease in the price of yam translates into a 0% increase in the production and supply of yam, then the supply elasticity is said to be perfectly elastic for yam and its value becomes zero (0) in both instances.

The curve is a straight line running parallel and horizontally (to the x axis).

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Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 7 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.


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Amazing facts in Economics


NOTABLE POINTS IN Economics

Below are definitions of demand from the perspective of some notable professors:

The demand for goods is a schedule of the amounts that buyers would be willing to purchase at all possible prices at any one instant of a time.

Professor Mayers

Demand is the various quantities of goods that would be purchased per time period at different prices in a given market.

Professor Hibdon

The demand for anything, at a given price is the amount of it which will be bought per unit of time at the price.

Professor Benham

Generally, demand is defined as the willingness of a person, buyer or consumer to buy a specific quantity of goods or service at a given price and time.

From the above definitions, we can infer that the definition of demand is referenced to three major factors. These are:

  1. Quantity of Goods Demanded

  2. Price

  3. Time

Please read more on the concept of demand here.

In economics, we have various types of cost. These are:

  • Accounting cost

  • Economic cost

  • Outlay cost

  • Opportinity cost

  • Fixed cost

  • Variable cost

  • Direct cost

  • Indirect cost

  • Sunk cost

  • Incremental cost

  • Private cost

  • Social cost

Please read the explanations on the aforementioned types of cost here

A Black market is said to take place when there is illegal buying and selling of goods and services.

Black markets usually take place outside the government's rader and without government's knowledge so as to avoid tax or any other government regulations.

Black market presents the avenue for government prohibited goods like hard drugs, war weapons and firearms to be bought by criminals.

A black market can also occur on the web for cyber criminals or those who are involved in computer hacking. To achieve their malicious aim, these individuals will go into the dark web and purchase or rent their respective hacking tools for a fee. Normally, payments are made in crypto currencies.

However, a black market isn't generally considered as bad. Infact, it has its advantages and disadvantages.

Please read more on black market here

Below are some advantages of black market:

  • Goods and services are sold at a cheaper price.

  • It helps some people make plenty of money.

  • The illegal sales of human organs, for example, the sale of human kidneys have aided in saving some lives.

  • Some people actually depend on black market for their daily bread.

  • Some of the proceeds from black market may be utilized towards the economic growth of a nation. For instance, schools and hospitals had been built with money made from black market.

The law of supply states that:

The quantity of the supplied services or goods will increase as the price increases and they will decrease as the price decreases provided all other factors remain constant.

These constant factors are very important when stating the supply law. They include:

  • The price of input resources

  • The kind of technology used during production

  • The number of suppliers

  • The number of buyers; and so on.

 

A graph that shows the relationship between the price of a product or service, and its quantity supplied is the supply curve.

Supply curve can be defined as a graphical representation of the direct relationship between the prices of goods and services and the quantity supplied (of such goods and services) within a particular period of time provided all other factors remain constant.

Len Academy - Supply CurvePlease read more on the law of supply and supply curve here