What Are the Determinants of the Price Elasticity of Supply

question 112

Essay

What are the determinants of the price elasticity of supply and how does each affect elasticity?
Price elasticity of supply depends on the flexibility of sellers to changes in price. For resources like land of a specific type and location, there is practically no flexibility. For manufactured products, there is greater flexibility. In most markets, the time period over which supply is measured is a key determinant. Over short time periods, supply curves tend to be less elastic and over longer periods, supply curves tend to be more elastic.

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Definitions:

Future Value

The estimated value of a current asset or amount of money at a specified date in the future, taking into account factors like interest rates or stock growth.

Present Value

The present-day valuation of a future sum of money or cash flow series, assuming a particular rate of earnings.

Compound Interest

Interest that is computed on both the original principal amount and the interest that has been added to it from past periods, for either a loan or deposit.

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth or return.