Price elasticity of supply measures how responsive the quantity supplied of a good is to a change in its price. It tells us by what percentage supply expands or contracts when price moves by one percent.

Degrees of supply elasticity

• Perfectly inelastic ($E_s = 0$) — quantity does not change at all; supply curve is vertical (e.g. total land in an economy).
• Inelastic ($E_s < 1$) — quantity changes less than proportionately to price.
• Unitary elastic ($E_s = 1$) — quantity changes in exact proportion.
• Elastic ($E_s > 1$) — quantity changes more than proportionately.
• Perfectly elastic ($E_s = \infty$) — supply is unlimited at one price; curve is horizontal.

Determinants

• Time — supply is far more elastic in the long run, when firms can adjust capacity
• Ease of storing goods (storable goods have more elastic supply)
• Ability to shift resources into producing the good
• Spare capacity and availability of inputs

Quick example

Price of a commodity rises from ₹100 to ₹120 and quantity supplied rises from 500 to 560 units:

1. % change in price = (20 ÷ 100) × 100 = 20%. …