# Elasticity of supply explained with its types

### 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:

• Greater than 1
• Less than 1
• Equal to 1

Below are the five 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.

Below is a graph that shows a perfectly inelastic supply

Goods, services and commodities are said to be perfectly inelastic whenever a given quantity of these 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.

#### 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

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.

#### 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 < ∞.

#### 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:

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.

#### 5. Perfectly Elastic Supply

A service or commodity is said to be perfectly elastic when an increase in price results into 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:

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.

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).

• If you need a standard website at an affordable price.

• Online training on the academic subjects: biology, chemistry and basic science.

• If you require an advanced smart school management system (web application) for your school.

Please Register here or Login here to contribute to this topic by commenting in the box below.