Answer: Depends on the flexibility of sellers to change the amount of the good they produce
What does price elasticity of supply depend on?

The price elasticity of supply (PES or Es) is a measure used in economics to show the responsiveness or elasticity of the quantity supplied of a good or service to a change in its price. The elasticity is represented in numerical form and is defined as the percentage change in the quantity supplied divided by the percentage change in price. When the elasticity is less than one the supply of the goo…

The price elasticity of supply (PES or Es) is a measure used in economics to show the responsiveness or elasticity of the quantity supplied of a good or service to a change in its price. The elasticity is represented in numerical form and is defined as the percentage change in the quantity supplied divided by the percentage change in price. When the elasticity is less than one the supply of the good can be described as inelastic; when it is greater than one the supply can be described as elastic. An elasticity of zero indicates that quantity supplied does not respond to a price change: the good is "fixed" in supply. Such goods often have no labor component or are not produced limiting the short run prospects of expansion. If the elasticity is exactly one the good is said to be unit-elastic. The quantity of goods supplied can in the short term be different from the amount produced as manufacturers will have stocks which they can build up or run down.

Availability of raw materials For example availability may cap the amount of gold that can be produced in a country regardless of price. Likewise the price of Van Gogh paintings is unlikely to affect their supply. Length and complexity of production Much depends on the complexity of the production process. Textile production is relatively simple. The labour is largely unskilled and production facilities are little …

Availability of raw materials For example availability may cap the amount of gold that can be produced in a country regardless of price. Likewise the price of Van Gogh paintings is unlikely to affect their supply. Length and complexity of production Much depends on the complexity of the production process. Textile production is relatively simple. The labour is largely unskilled and production facilities are little more than buildings – no special structures are needed. Thus the PES for textiles is elastic. On the other hand the PES for specific types of motor vehicles is relatively inelastic. Auto manufacture is a multi-stage process that requires specialized equipment skilled labour a large suppliers network and large R&D costs. Mobility of factors If the factors of production are easily available and if a producer producing one good can switch their resources and put it towards the creation of a product in demand then it can be said that the PES is relatively elastic. The inverse applies to this to make it relatively inelastic. Time to respond The more time a producer has to respond to price changes the more elastic the supply. Supply is normally more elastic in the long run than in the short run for produced goods since it is generally assumed that in the long run all factors of production can be utilised to increase supply whereas in the short run only labor can be increased and even then changes may be prohibitively costly. For example a cotton farmer cannot immediately (i.e. in the short run) respond to an increase in the price of soybeans because of the time it would take to procure the necessary land. Inventories A producer who ha...

 This free site is ad-supported. Learn more
​