ABSTRACT
Elasticity of supply measures the responsiveness of supply to a change in price. This relationship may be expressed as a formula:
Percentage change in quantity supplied Percentage change in price
Exhibit 5.1 shows a worked example of how to calculate elasticity of supply. Where supply is inelastic it means that supply cannot easily be changed, whereas elastic
supply is more flexible. The range of possible outcomes is summarized in Figure 5.1. Note that any straight line supply curve passing through the origin has supply elasticity of 1.
