ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When a good has an elasticity of zero it is called “perfectly” inelastic. This means that the supply and/or demand of the product will not change at all even as its price changes.

Detailed explanation-2: -Inelastic supply refers to goods where the level of supply will not significantly change as prices change. Usually, these are goods where it is hard to add or subtract to the supply, or suppliers are operating at nearly full capacity. One example of a good with inelastic supply is housing.

Detailed explanation-3: -When the supply is inelastic, the firm can increase the price of its products because the harder a product is to find in the market, the costlier will be when available. In addition, an inelastic supply in the short-term requires the firm to implement a forward planning strategy to anticipate future demand.

Detailed explanation-4: -If the supply changes little with a change in price, then supplies are considered inelastic. Supply is elastic if there are large changes in supply for a small change in price. If the percentage change in price is equal, though opposite, to the percentage change in quantity, then supply elasticity is unit elastic.

Detailed explanation-5: -Supply is price inelastic if the price elasticity of supply is less than 1; it is unit price elastic if the price elasticity of supply is equal to 1; and it is price elastic if the price elasticity of supply is greater than 1. A vertical supply curve is said to be perfectly inelastic.