Answer to Question #80872 in Macroeconomics for konstable

Question

When is a supply curve most elastic in nature? Discuss why this is the case?

Answer 1

The proposal is elastic, when it changes more than the price.

Conversely, the proposal is inelastic, if the percentage of its change is less than the percentage of price change.

Factors affecting the elasticity of supply.

a) the availability of a reserve of production capacities;

b) availability of stock

c) the amount of time the manufacturer has in order to react to price changes.

Obviously, the more free capacities, stocks and time, the greater is the opportunity to increase the supply in the event of a price increase stimulating it.