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## Microeconomics

### Course: Microeconomics>Unit 3

Lesson 2: Price elasticity of supply

# Elasticity of supply using a different method

Thinking about elasticity of supply. Created by Sal Khan.

## Want to join the conversation?

• What are the differences between elastic and inelastic supply?
• The Price Elasticity of Supply (PES) for elastic and inelastic supply would be different.

The PES for elastic supply would be greater than 1. This tells us that if prices were to increase (or decrease) by 1%, the quantity supplied would increase (or decrease) in a number greater than 1%.

The PES for inelastic supply would be between 0-1. This tells us that if prices were to increase (or decrease) 1%, the quantity supplied would increase (or decrease) in a number between 0 and 1%.
• What would be a real life example of Unit Elasticity of supply?
• That's a tough one and there probably is no answer that has perfect unit elasticity over all ranges of price and quantity of supply. For this to happen, the barriers to enter the market (the costs) have to rise with each new supplier. Otherwise once it became profitable to enter the market a huge surge of suppliers would come in.

The best example I can think of is commercial fishing for say grouper. If all of the sudden the price of grouper went slightly up, some fishermen would shift from catching mahi mahi to catching grouper but the barrier to enter the market (buying a fishing boat) would prohibit a huge surge of new fishermen. Now if it went higher, more fishermen would change over, maybe this time shifting from shrimping (different gear required) to grouper fishing, further increasing supply. If the price continued to climb, you might see a influx of new boats and finally if it continued to climb, you might see large captive pens raising grouper as a farmed crop. Each step would have higher costs of entering the market and could result in an almost unit elastic supply
• How do you come to the percent change in quantity supplied? At about I hear you say "10 plus 6 is 26" It's very confusing
• he meant to say 10+16 is 26 divided by 2 is 13. He was just finding the average of the two numbers, which provides your denominator. the numerator is the difference between your two numbers. so the difference between the two numbers (10 and 16) over the average of those numbers. That gives you your percent change in quantity supplied.
• The unit elasticity curve for supply and demand are different.Why??
• Raising the price is encouraging for sellers, but discouraging for buyers. So as the priced goes up, the two curves move in opposite directions.
• Does anyone know where I can do practice questions on this?
• Why do graph of Unit Elasticity of Supply different from graph of Unit Elasticity of Demand?
• Raising the price is encouraging for sellers, but discouraging for buyers. So as the priced goes up, the two curves move in opposite directions.
(1 vote)
• What would happen if both, the supply and demand were either perfectly elastic (at different prices) or perfectly inelastic (at different quantities)? What would be the equilibrium price / quantity?
• When perfectly elastic, if supply was above demand, nothing would sell, if demand was above supply, an infinite amount would be sold. When perfectly inelastic, if supply was leftward or rightward of demand a total of D1 - S1 would be consumed at any price (D1 represents demand curve quantity, S1 represents supply curve quantity).
• Are there any practice problems to supplement the lectures? (Just wanted to make sure I wasn't missing anything.)