1. What is Price Elasticity of Supply?

Price elasticity of supply measures the responsiveness of quantity supplied to changes in price. It indicates how much the quantity supplied changes when the price changes by 1%.

2. How Does the Calculator Work?

The calculator uses the elasticity of supply formula:

Where:

• \( E_s \) — Price elasticity of supply (dimensionless)
• \( \%\Delta Q_s \) — Percentage change in quantity supplied (%)
• \( \%\Delta P \) — Percentage change in price (%)

Explanation: The formula calculates the ratio of percentage change in quantity supplied to percentage change in price, showing how responsive producers are to price changes.

3. Importance of Elasticity of Supply

Details: Understanding supply elasticity helps businesses make production decisions, governments design tax policies, and economists predict market responses to price changes.

4. Using the Calculator

Tips: Enter percentage change in quantity supplied and percentage change in price as decimal numbers. Both values must be valid and percentage change in price cannot be zero.

5. Frequently Asked Questions (FAQ)

Q1: What does different elasticity values mean?
A: E_s > 1 = elastic supply, E_s < 1 = inelastic supply, E_s = 1 = unit elastic supply, E_s = 0 = perfectly inelastic, E_s = ∞ = perfectly elastic.

Q2: What factors affect supply elasticity?
A: Production time, availability of inputs, technology, storage capacity, and mobility of factors of production.

Q3: How is supply elasticity different from demand elasticity?
A: Supply elasticity measures producer responsiveness to price changes, while demand elasticity measures consumer responsiveness.

Q4: Can supply elasticity be negative?
A: Typically no, as higher prices usually lead to increased supply. Negative values would indicate unusual market conditions.

Q5: How is percentage change calculated?
A: %Δ = [(New Value - Original Value) / Original Value] × 100%