What is price elasticity of supply?

1 Answer
Feb 7, 2016


responsiveness of supply to a change in price


Price elasticity is how supply reacts when it comes to a change in price.

For example, If the price changes from $30 to $45 and supply changes from 40 to 65.

We can see the price increased for 50% while the supply increased for 62.5%. So the change in supply is bigger than the change in price. Therefore,it is price elastic.

When the change in supply is not as big as the change in price, it is price inelastic.( usually restricted resources such as Wimbledon seats,even if you increase the price, we couldn't increase the number of seats)