ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Price elasticity of supply measures the responsiveness to the supply of a good or service after a change in its market price. According to basic economic theory, the supply of a good will increase when its price rises. Conversely, the supply of a good will decrease when its price decreases.

Detailed explanation-2: -Economists generally lump together the quantities suppliers are willing to produce at each price into an equation called the supply curve. The higher the price, the more suppliers are likely to produce. Conversely, buyers tend to purchase more of a product the lower its price.

Detailed explanation-3: -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-4: -More efficient production reduces costs and allows for larger production numbers at lower prices. The number of competitors is a factor. An increase in the number of suppliers makes the price of a product or service more elastic. If one supplier can’t meet demand, others will rush to fill the gap.

Detailed explanation-5: -An elastic demand or elastic supply is one in which the elasticity is greater than one, indicating a high responsiveness to changes in price. An inelastic demand or inelastic supply is one in which elasticity is less than one, indicating low responsiveness to price changes.