Factors Determining Elasticity of Supply

Several factors decide how elastic or inelastic the supply of a particular commodity turns out to be:

• Nature of the commodity. Perishable goods (fresh produce) tend to have inelastic supply in the short period, since stock cannot be increased quickly; durable, storable goods (manufactured items) tend to have more elastic supply.
• Time period. Supply is generally more elastic the longer the time period allowed: in the market period it is close to perfectly inelastic (stock is fixed); in the short run some inputs can be varied, giving moderate elasticity; in the long run all inputs (including plant and machinery) can be adjusted, so supply tends to be most elastic.
• Spare production capacity. A producer with idle machinery or unused capacity can raise output quickly when price rises, making supply more elastic; a producer already working at full capacity needs new investment first, making supply comparatively inelastic.
• Availability and cost of inputs. If raw materials, labour, and other inputs are easily and cheaply available, output — and hence supply — can expand more readily as price rises.
• Ease of switching production. If a producer's resources can be shifted easily between producing this commodity and producing something else, supply responds more readily to a price change. …