Price elasticity of supply

Price elasticity of supply (eS) measures how much the quantity supplied responds to a change in price:

eS = % change in quantity supplied ÷ % change in price

Because supply curves slope upward, eS is positive. Like all elasticities, it does not depend on the units used.

Example: the price of notebooks rises from ₹20 to ₹25 (+25%), and the quantity supplied rises from 400 to 600 (+50%). eS = 50 ÷ 25 = 2.

• A vertical supply curve has eS = 0: the quantity cannot change.

For a straight-line supply curve, there is a simple geometric test:

• if it meets the price axis (above the origin), eS > 1;
• if it passes through the origin, eS = 1;
• if it meets the quantity axis at a positive value, eS < 1.