Introduction
Elasticity of supply measures the responsiveness of quantity supplied to changes in price. Based on this responsiveness, supply curves are classified as perfectly elastic, perfectly inelastic, unit elastic, elastic, and inelastic. Each has unique graphical representations and implications in economic theory.
Perfectly Elastic Supply
A perfectly elastic supply means that suppliers will supply any amount of the good at a specific price, but none at any other price. The supply curve is a horizontal line parallel to the X-axis.
Diagram: Horizontal line showing infinite supply at a fixed price.
Perfectly Inelastic Supply
In perfectly inelastic supply, the quantity supplied remains constant regardless of the price. This typically occurs in goods with fixed availability, such as land or rare collectibles.
Diagram: Vertical line representing fixed quantity regardless of price change.
Unit Elastic Supply
With unit elastic supply, the percentage change in quantity supplied equals the percentage change in price. The supply curve originates from the origin at a 45-degree angle.
Diagram: Straight line through the origin showing equal proportional change.
Inelastic Supply
When supply is inelastic, a change in price leads to a less than proportionate change in quantity supplied. This is common in the short run when producers cannot easily change production levels.
Diagram: Steep upward-sloping curve.
Elastic Supply
Elastic supply implies that a small change in price causes a larger percentage change in quantity supplied. It is typical of goods with flexible production processes.
Diagram: Flatter upward-sloping line showing greater responsiveness.
Conclusion
Each type of supply curve demonstrates different producer responses to price changes. Perfectly elastic and inelastic are extreme cases, while unitary, elastic, and inelastic reflect more common market behaviors. Understanding these curves helps in policy planning and business strategy.