•The price elasticity of supply of a good measures the responsiveness of quantity supplied to changes in the price of the good.

•Price elasticity of supply (e_{S}), is defined as

•Price elasticity of supply, (e_{S})= (Percentage change in quantity supplied)/(Percentage change in price)

Where âˆ†*Q *is the change in quantity of the good supplied to the market as market price changes by âˆ† *P *.

•Suppose the market for cricket balls is perfectly competitive.

•When the price of a cricket ball is Rs10, 200 cricket balls are produced in aggregate by the firms in the market.

•When the price of a cricket ball rises to Rs 30, let us assume that 1,000 cricket balls are produced in aggregate by the firms in the market.

•The percentage change in quantity supplied = 400

•Percentage change in market price = 200

•Hence, price elasticity of supply, *e*_{S} =2

•When the supply curve is vertical, supply is completely insensitive to price and the elasticity of supply is zero.

•In other cases, when supply curve is positively sloped, with a rise in price, supply rises and hence, the elasticity of supply is positive.

•Figure shows a straight line supply curve. *S *is a point on the supply curve.

•It cuts the price-axis at its positive range and as we extend the straight line, it cuts the quantity-axis at *M *which is at its negative range.

•The price elasticity of this supply curve at the point *S *is given by the ratio, *Mq*_{0}/*Oq*_{0}.

•For any point *S *on such a supply curve, we see that *Mq*_{0} *> Oq*_{0}.

•The elasticity at any point on such a supply curve, therefore, will be greater than 1.

•Here, we consider a straight line supply curve and *S *is a point on it.

•It cuts the quantity-axis at *M *which is at its positive range.

•The price elasticity of this supply curve at the point *S *is given by the ratio, *Mq*_{0}/*Oq*_{0}.

•Now, *Mq*_{0 }*< Oq*_{0} and

•Hence *e*_{S} < 1.

•Here the supply curve goes through the origin.

•The price elasticity of this supply curve at the point *S *is given by the ratio, *Oq*_{0}/*Oq*_{0} which is equal to 1.

•At any point on a straight line, supply curve going through the origin price elasticity will be one.

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