A Levels Economics (Unit 1, 2 The Allocation of Resources in Competitive Markets) Mapa Mental sobre Price Elasticity of Supply, criado por beth2384 em 30-12-2013.
PRICE ELASTICITY OF SUPPLY= the responsiveness
of supply to changes in the price level
Price elasticity of supply= % change in
quantity supplied / % change in price
above 1= price elastic
supply
e.g. pencils (you can easily produce a lot
more)
below 1= price inelastic
supply
e.g. agricultural products (because
they have a long growing cycle),
often comodoties
Factors affecting price elasticity of supply
Time
how quickly can suppliers respond to a change in
price? (if commodities then probably a long time, so
price inelastic supply)
Raw Materials
Some raw materials may be very scarce e.g.
oil so it could be difficult to increase supply
quickly when more oil needs to be found first
Availability of stock or stock-pilling
Suppliers with stocks of finished goods can respond
quickly, provided products are not perishable
Ease of
switching
between
alternative
production
if suppliers can move production from one item to another they can respond quickly (e.g. printing football T-shirts for different clubs)
availability
of spare
capacity
Can expand output more easily so would have price elastic supply
number of firms and ease at which new firms can enter the market
new resources could easily enter a market so it would
be price elastic supply if new firms could easily enter
ability to alter production methods
if firms can quickly transfer to different methods they could
increase output easily (e.g. more capital intensive production)
COMMODITY= a good that is traded, but usually refers to raw materials or
semi-manufactured goods that are traded in bulk such as tea, iron ore, oil
or wheat. Often they are unbranded goods (homogeneous) where all firms'
products are bery similar and undistinguishable from each other.