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Explain the meaning of price elasticity of supply. |
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Answer» Price elasticity of supply is the measure of change in supply of a commodity due to change in its price. Law of supply tells us how the supply will change as a result of change in price; that is fall and increase in price will lead to contraction and extension of supply. But if we want to know how much supply will be increased compared to say 10 per cent increase in price, or which proportion change in the supply will occur, then we have to study the flexibility of supply. Thus, there is a proportional change in the supply after the proportional change in price elasticity in the supply. |
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