Question

Mention the four determinants of elasticity of supply.

Hint:

Elasticity of supply depends on how quickly and easily a producer can change their output. Think: time, storage, technology, and availability of resources.

Answer 1

The elasticity of supply measures how responsive the quantity supplied is to a change in price. Four key determinants are:

Time Period: Supply is more elastic in the long run than in the short run. In the long run, firms can adjust all factors of production, whereas in the short run, some factors are fixed.
Nature of the Good: The supply of durable goods (like furniture) is relatively elastic as they can be stored. The supply of perishable goods (like fresh vegetables) is inelastic.
Production Technology: Firms with complex production technologies may have an inelastic supply, as it is difficult to change output levels quickly. Firms with simpler technology can adjust supply more easily, making it more elastic.
Availability of Inputs: If the factors of production (like raw materials or skilled labor) are easily available, supply will be more elastic. If inputs are scarce, supply will be inelastic.