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What Are The Determinants Of Supply Elasticity?

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Anonymous Profile
Anonymous answered
•change in input prices
•change in technology
•change in taxes and subsidies
•change in the prices of other goods
•change in producer expectations
•change in the number of suppliers
•Any factor that increases the cost of production decreases supply.
•Any factor that decreases the cost of production increases supply.
Uzma Shahzad Profile
Uzma Shahzad answered
The elasticity of supply of different products depends upon the following factors.
Nature of Products: if the product is perishable in nature, its supply would be perfectly inelastic because the supply of perishable goods can neither be increased nor decreased in a short period. On the other hand, the supply of durable goods is generally elastic.
Nature of Production Process: if the production process of a product is complex and complicated, its supply would be inelastic because with a fall in price its supply cannot be reduced to a large extent. On the other hand, if the production process is simple the elasticity of supply would be elastic.

Gestation Period: the products whose gestation period is short are supplied at a short notice. Therefore, the supply of these products is generally elastic. Contrary to it, supply of the products whose gestation period is long is inelastic because their supply cannot be increased immediately following an increase in their prices.Capital Requirements: When a large amount of capital is required to manufacture a product its supply would be inelastic. The reason is that its supply cannot be easily increased as a result of an increase in its price.in this way capital requirements can be fulfilled.

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