Types of Elasticity of Supply
Elasticity of Supply ( Price Elasticity of Supply) can be divided into five types as follows:
I) Perfectly Elastic Supply:
If the negligible change in the price of a commodity leads to infinite change in it's quantity supply, then it is called perfectly elastic supply. Thus,
In this case, the supply surve will be horizontal as shown in the figure below:
In the above figure, quantity supply increases from Q1 t0 Q2 at the same price P1, which implies there is negligible change in price.
II ) Perfectly Inelastic Supply (Es = O ) :
If there is no change in the quantity supplied, despite the change in the price of the commodity, then it is said to be perfectly inelastic supply. Thus,
In this case, the supply curve will be vertical as shown in the figure below:
In the given figure, the quantity supplied of a commodity remains same at Q1 even there is increase in price from P1 to P2.
III) Relatively Elastic Supply (Es> 1) :
If the percentage change in quantity supply of a is greater than the percentage change in its price, then it is called relatively elastic supply. Thus,
If %∆Qs >%∆P, then Es > 1.
In this case, the demand curve will be flatter as shown in the figure below:
In the above figure, quantity supplied decreases from Q2 to Q1 with the decrease in price from P2 to P1 in such a way that: Q1Q2>P1P2. So that, Es>1.
IV) Relatively Inelastic Supply ( Es < 1 ) :
If the percentage change in quantity supply of a commodity is less than the percentage change in its price, it is called relatively inelastic supply . Thus,
If %∆Qs <%∆P, then Es < 1.
In this case, the supply curve will be steeper as shown in the figure below :
In the above figure, quantity supply increases from Q1 to Q2 due to increase in price from P1 to P2 in such a way that: Q1Q2<P1P2. So that, Es<1.
V)Unitary Elastic Supply(Es=1):
If the percentage change in quantity supply of a commodity is equal to the percentage change in its price, it is called unitary elastic supply . Thus,
If %∆Qs=%∆P, then Es=1.
In this case, the demand curve will be neither flatter nor steeper as shown in the figure given below :
In the clbove figure, quantity supply increases from Q1 to Q2 due to increase in price from P1 to P2, in such a way that: Q1Q2=P1P2. So that, Es=1.