Describe in detail the factors that affects supply and
Factors that affects the elasticity of supply:
1)Price of the Good:
The elasticity of supply of a good depends upon the price of that good. If the price of a good increases, the quantity supplied of it will also increase and vice versa. Therefore, the coefficient of price-elasticity of supply depends on the price of the particular good. Elasticity of supply may be greater than, less than, or equal to one, depending on the price.
2)Future Price:
If the sellers think that the price of the good will increase in the near future then they would decrease their supply in the present.
3)Cost of Production:
The elasticity of supply depends on the nature of the good’s cost of production. If the production cost rises at a faster rate as the quantity produced increases then the supply will rise at a slower rate in response to a price increase. In this case, Es would be relatively small and vice versa.
4)Nature of the product:
The supply of a good will depend upon the nature of the good. The perishable good have an inelastic supply and the lesser perishable good have an elastic demand.
5) Time period:
The elasticity of supply in the long period of time would be larger than that in the short-period market.
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