Econ. Nov 17
Published on Dec 11, 2015
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PRESENTATION OUTLINE
can suppliers make more as demand increases?
depends...
elasticity of supply
how responsive the quantity supplied by a seller is to rise/fall in price
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Market price of laptops increases from $90 to $100. Supplier wants to capitalize on this so they up production from 1.4 million to 1.6 million. Coefficient of supply is...?
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same rules for demand coefficients!
less than one =inelastic, equal =unitary, greater than one =elastic
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when price goes up by a certain amount...
manufacturer can increase quantity supplied at greater rate
Photo by Mykl Roventine
seller with elastic supply
better positioned to take advantage of a demand increase
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quantity supplied can easily/quickly be increased
to meet demand, resulting in increased revenues
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Seller can't increase quantity supplied by a greater percentage than the percent increase in price.
factors affecting supply elasticity
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time
longer time period seller has to increase production, more elastic supply
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Price of lolig rises. Growers can't increase production in one day, or even in a month. Supply is inelastic until more can be planted, harvested, brought to market. Short term is inelastic, long term can be elastic
Photo by Davide Restivo
cost factors
increasing output (supply) can be expensive depending on industry
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