Determinants of Price Elasticity of Supply
They are the factors that decide how quickly and easily producers can increase their supply when the price of a product rises.
In other words, these factors explain how responsive supply is to a change in price.
If supply can increase quickly → elastic supply. If supply cannot increase easily → inelastic supply.
1. Spare Capacity
If a firm has unused machines and workers, it can increase supply easily → elastic.
2. Stocks (Inventories)
If a firm has many goods stored, it can supply more quickly → elastic. If goods can’t be stored (milk, vegetables) → inelastic.
3. Number of Producers
More firms in the industry → easier to increase total supply → elastic. Few firms → inelastic.
4. Time Period
Short run → firms cannot change production easily → inelastic. Long run → firms can expand → elastic.
5. Factor Substitution
If workers/machines can switch tasks easily → elastic. If switching is hard → inelastic.