Inelastic Supply

If the amount offered for sale is less affected by change, then the supply is said to be inelastic.

Categories/Types of the Price elasticity of Supply:

Definition and Explanation:

There are five degree of Price elastic of supply:

(1) Infinitely Elastic supply:

When the amount supplied at the ruling price is infinite, we say the supply is infinitely elastic. An infinitely elastic supply curve is a horizontal straight line asa shown in the figure 7.1

Diagram/Figure and Example:

 

 

Fig: Infinite Elastic Supply

 

In this diagram 7.1, when the price is OP, the producer supplies an infinite amount of goods if the price falls slightly below OP then nothing will be supplied by him.

(2) Elastic supply:

When the percentage change in the amount of a good supplied is greater than the percentage change in price that generated it. The supply is then said then said to be elastic supply.

For example, if the price of oranges increases from TKI.5 to TK 6 and the quantity supplied rises from 150 to 600 oranges the supply will be elastic.

 

 

 

Fig. 7.2 Quantity

In the diagram 7.2 SS supply curve is elastic and the numerical vaulue for elasticity is greater than 1.

(3) Unitary Elasticity:

When the percentage change in the quantity in the supplied is exactly equal to percentage change in price that evoked it, the supply is said to have elasticity equal to unity, the elasticity of supply is equal to 1.

Fig. 7.3 Quantity

In the diagram 7.3 SS supply curve drawn through the origin has unit elasticity of supply.

(4) Inelastic Supply:

When the percentage change in the quantity supplied is less than the percentage change in the price that generated it, the supply is said to be inelastic. The inelasticity of supply is less 1.

 

 

 

Fig. 7.4 Quantity

In this figure 7.4 SS supply curve (which is steeper is than the elastic supply curve) shows that with a significant change in price, the quantity offered for sale is not very much affected.

(5)Perfectly Inelastic Supply

In Perfectly Inelastic Supply, the quantity supplied does not change as price changes. The elasticity of supply in other words is zero.

For example, if the price of a painting by an artist, who has died, rises from $50 thousand, the supply of the painting cannot be increased. Diagram 7.5 shows the perfectly inelastic supply.

 

 

Fig: Perfect inelastic supply