When does market supply become price elastic?
Price elasticity of demand is an elasticity that measures the nature and degree of the relationship between changes in quantity demanded of a good and changes in its price. The price elasticity of supply is defined as a numerical measure of the responsiveness of the quantity supplied of product(A) to a change in price of product (A) alone. It is measured as the percentage change in supply that occurs in response to a percentage change in price. For example, if, in response to a 10% rise in the price of a good, the quantity supplied increases by 20%, the price elasticity of supply would be 20%/10% = 2. The quantity of a good supplied can, in the short term, be different from the amount produced, as manufacturers will have stocks which they can build up or run down. In the long run, however, quantity supplied and quantity produced are synonymous.
