Various factors which affect the elasticity of demand of a commodity are. The main determinantsfactors which determine the degree of price elasticity of supply are as under. We call only osculation some general rule in this connection. Discuss factors that determine demand and supply elasticity. The change in one of the factors for instance price and effect of it on another factor like demand or supply are measured by elasticity. This lesson discusses and provides examples of the factors that affect the elasticity of supply, such as stocking capacity and production costs. Below are the important factors that directly or indirectly influence the degree of demand to any small change in price.
Some of these factors are within the control of the organization whereas others may be beyond their control. However, in the long run a firm will increase the input of all factors of production and thus the supply becomes more price elastic. Factors affecting elasticity of supply prelim topic 3. Elasticity is the measure of how the change in one of the factor will be affected on the other factors. Kvs, delhi region factors affecting elasticity of demand 2. These factors which influence price elasticity of demand, in brief, are as under. Gregory mankiws principles of microeconomics, 2nd edition, chapter 5. As a result, reliable estimates of residential water demand, water source choice decisions and the factors affecting it have become more important for policy making in the water supply sector.
Learn vocabulary, terms, and more with flashcards, games, and other study tools. Factors affecting cross elasticity of demand answers. Factors that determine elasticity of demand economics essay. Online classes covering all topics with easily accessible notes, can help students gain knowledge at their home at their own pace and convenience.
It is not possible to classify goods according to the nature of their demand and lay down rigid rules to determine whether demand in any particular case is elastic or inelastic. Elasticity of supply is determined by the following factors. Which factors are important in determining the demand. Explaining price elasticity of supply economics tutor2u. An elastic goods price will change as the price changes. The concept of elasticity of supply has great significance. If the price of a commodity rises and the producers. If elasticity is greater than 1 and the supply curve shifts to the left, price will rise.
As a general rule, the more easily the factors can be transferred from the production of one good to that of another, the greater will be the elasticity of supply. There are, in fact, many factors that are important in determining the demand elasticity for. The main determinants factors which determine the degree of price elasticity of supply are as. Supply suffers during shortages of raw production materials or a products sudden popularity that outstrips supply. What are the factors affecting the price elasticity of. The supply of goods and services is most elastic during a recession, when there is plenty of spare labour and capital resources. The numerical value of elasticity of supply is different for different situations. A change in price does not always lead to the same proportionate change in demand. Since durable goods can be stored for a long time, its elasticity of supply is very high. Time is the most significant factor which affects the elasticity of supply.
When these factors are large enough, the supply curve will shift. Kvs, delhi region definition it is defined as proportionate change in quantity demanded to proportionate change in price. Elasticity of demand of a commodity is influenced by its nature. These factors interact in a complex manner to determine supply elasticity. Various factors, which determine the elasticity of supply of a product, are given below. In models of economic growth the longrun rate of growth is usually determined by exogenous factors like the increase in working population and technical progress. Regardless of the control, if the management has knowledge about these factors, it can manage its supply better. Now, we can calculate elasticity of supply at point p as under. Lecture topics f actors determining price elasticity of demand t he price elasticity of demand is not the same for all commodities. The formula for calculating elasticity of supply es is as follows. Various factors can affect supply and demand, from weather that drives demand for jackets to a health trend that drives demand for kale. Some of the factors that determine the elasticity of supply are as follows. In developing countries of the world, the per capital income of the people is generally low. Factors affecting elasticity of demand linkedin slideshare.
Elasticity of supply plays a very important role in determining prices of products. Takshila learning offers ncert economics class 12 topics in one of the simplest, easiest and most convenient options for the students. Elasticity measures the percent change in one economic variable when there is a 1% change in a different economic variable. The elasticity of supply is influenced by a number of factors. Availability of suitable factors of production to increase the output. Factors determining price elasticity of demand economics. Some of the major factors affecting the elasticity of demand of a commodity are as follows. Price elasticity of supply pes measures the relationship between change in quantity supplied. The flexibility of production levels and the availability of critical resources are among the factors that affect the supply elasticity of a product. Price elasticity of supply boundless economics lumen learning. If goods can be stocked with ease and have a long shelf life, then supply will be elastic.
Pdf demand and supply as factors determining economic growth. It describes the current policy environment that will influence supply and. If the price of a commodity rises and the producers have enough time to make adjustment in the level. Elasticity has been argued has primarily depending on if the actual commodity to be demanded is a basic necessity, a comfort or a luxury. If there is plenty of spare capacity then a business can increase output without a rise in costs and supply will be elastic in response to a change in demand. Define and explain the factors that influence the cross elasticity of demand and the income elasticity of demand. When calculating income elasticity of demand, assume price does not.
Determinants factors of price elasticity of supply. The type of good that a producer supplies will affect elasticity. The extent of rise in price of a commodity depends on the elasticity of supply. The factors that influence the elasticity of supply are the resource substitution possibilities and time frame for the supply decision. Basically elasticity of supply shows the amounts that costs rise as production increases when pes 1, then supply is price elastic when pes elasticity. If this tangential line intersects oy axis, elasticity of supply will be more than one. Like price elasticity of demand, price elasticity of supply is also dependent on many factors. Explain how demand and supply elasticity affect tax policy and the consequences of business decisions. If, for example, a new hybrid of seed is developed that substantially increases the yield of corn, the supply of corn will shift to the right, as seen in figure 7. The elasticity of supply pes is to calculate the responsiveness of the supply to a change in price.
Determining the price elasticity of demand involves all of the following factors except. With a classmate, name three factors that contribute to the total supply of an agricultural commodity. For example, a small change in price of ac may affect its demand to a considerable extentwhereas, large change in price of salt. The state of these factors for a particular good will determine if the price elasticity of supply is elastic or inelastic in regards to a change in price. Elasticity of supply will be less than one if the straight line supply curve cuts the horizontal axis on any point to the right of the origin, i. Elasticity of supply is a measure of a producers ability to cope effectively with changes in demand. Cross elasticity coefficient is defined as when the price of a particular commodity rises how is the demand of another commodity changing. Spare production capacity high pes when businesses or the economy has plenty of spare capacity also known as productive slack e. A commodity for a person may be a necessity, a comfort or. Summary of key factors affecting price elasticity of supply. Here we will measure the elasticity of supply at a particular point on a given supply curve. Factors affecting price elasticity of demand class 12 economics. What factors influence a change in supply elasticity.1200 535 371 1136 722 1234 636 51 1285 12 850 816 1524 1187 554 108 1261 184 855 564 1498 820 924 756 998 346 623 554 1366 608 316 1142 1196 437 823 1339