supply

Prepared By: Pramod Kr Jha 9810080832

9) Distinction between movement along the supply curve and an d shift in the supply curve? A) Basis

Meaning

Types pes of of mov movem emen ent/ t/sh shif ifts ts

Movement along the spply !rve A rise or fall in quantity supplied due to change in price is called movement along the same supply curve Ther Theree are are two two ty types pes of of movements: • Upward movement • Downward movement

e c i r +

A shift of supply curve means change in supply due to factors other than price There are two types of shifts in supply curve: • Rightward shift • Leftward shift

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uantity

nfluence

"hi#t in spply !rve

uantity

!ere the producer is under the !ere# the producer is under the influence of change in price of influence of factors other than the commodity only" price"

10) What is meant by elasticity of supply? Briefly explain the method of measuring it? A) $lasticity of supply is a relative measure of the responsiveness of quantity supplied o f a commodity to a change in its price" The greater the responsiveness of quantity supplied a commodity to change in its price# the greater its elasticity of supply" n precise term# the elasticity of supply can %e define as the percentage change in price that caused the change in quantity supplied" &hen a small rise in its price of a commodity leads to a relatively large e'pansion in supply# the the supply is comparatively elastic" (ut when a rise in price leads to a relatively smaller e'pansion in supply# the supply is said to %e inelastic"

Measurement of elasticity of supply )* +ercentage +ercentage Method Method :, The elasti elasticity city of supply supply is is measured measured %y dividing dividing the percent percentage age change in quantity supplied %y the percentage change in price" Thus# $s - . change in quantity supplied . change in price $s -



0

+ Prepared By: Pramod Kr Jha 9810080832


+  2* 3eometric Method:, Measuring elasticity of supply at a point on the supply curve" A straight line curve 11 has %een drawn in the figure %elow" &e are required to measure elasticity of supply at point R on it corresponding to output 4 and price 4+" n order to measure supply elasticity at pont R we e'tend the supply curve so that it meets the 5, a'is at point T" Then measure of elasticity of supply at point R can %e o%tained %y dividing the T %y the distance 4" Thus# 1upply elasticity at point R on supply curve 11 6$s* - T 4 Measuring elasticity of supply e c i + r +

T

R

 uantit

11) What are the factors which determine the elasticity of supply of a commodity? ive some examples of elastic supply! A) 7actor determining elasticity of supply:, ♦ Time: The time which is given to the producer to vary output in response to the change in price" 3enerally the longer the time producers get to ma8e ad9udments in the level of output in response to the change in price# the greater the elasticity of supply" ♦ The change in marginal cost of production: The more sharply the change in marginal cost# less elastic will %e the supply of output" ♦ Availa%ility of infrastructure facilities: f infrastructure facilities are availa%le for e'panding output# the elasticity of supply in response to the rise in price will %e relatively large" ♦ Response or %ehavior of the producer: f the producer do not response positively to the rise in price# the quantity supplied of a commodity would not increase much" 4n the other hand# if producers %ehave in such a way as to ma'imie profit" They will response positively to e'pand output %y a large amount in response to rise in price"

1") What are the degrees of types of elasticity of supply? A) The degree of types of elasticity of supply are:


Prepared By: Pramod Kr Jha 9810080832 

+erfectly inelastic supply: &hen the elasticity of supply is equal to ero is called perfectly inelastic supply" The supply of a commodity is said to %e perfectly inelastic - at all in response to change in its price" 1upply when quantity supplied does not change of rare good is one of these types as their supply cannot change with change in price" +)

+erfectly inelastic supply curve

+

+2

uantit 

nelastic supply: &hen the elasticity of supply is less than one ot is inelastic supply" &hen the percentage change in quantity supplied is less than the percentage change in price# supply will %e less than unit elastic" 1# $s = )

e c i r +

uantity



Unit elastic: The supply of a commodity is said to %e unit elastic when percentage change in supply is equal to percentage change in price" 1# $s - ) e c i r +

uantity



$lastic supply: &hen percentage change in supply is greater than percentage change in price is said to %e more than unit elastic or elastic supply curve" 1# $s < ) e c i r +

uantity





+erfectly $lastic: The supply of a commodity will %e perfectly elastic when its supply changes to an e'tent irrespective of any change in price"

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1

$s - infinite

$antity


supply

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