4.1. Definition of Price Elasticity of Supply

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En provenance du cours de University of Illinois at Urbana-Champaign

Microeconomics Principles

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University of Illinois at Urbana-Champaign

Microeconomics Principles

716 notes

This course offers an introduction to the functions of individual decision-makers—both consumers and producers—within the larger economic system. Emphasis is on the nature and functions of product markets, the theory of the firm under varying conditions of competition and monopoly, and the role of government in promoting efficiency in the economy. Most people make the incorrect assumption that economics is ONLY the study of money. My primary goal in this course is to shatter this belief. During this course, we will be addressing the above questions as well as many more relating to: -the environment -love and marriage -crime -labor markets -education -politics -sports -business My main goal is to show you the way economists think and how to use this analytical system to answer questions related not only to these and other important human issues, but to anything you end up doing with your life after this class. After all, as you will quickly find out, I believe that everything is economics!

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Elasticities

Welcome to the fourth week! This module we will cover one of my favorite economics concepts: elasticity. It is one of my favorites because of how useful it is to analyze policy implications, as well as its usefulness for business managers. This will be obvious to you when you read one of the discussion topics for this module: Should we legalize marijuana?

4.1. Definition of Price Elasticity of Supply2:44

4.2. Determinants of Price Elasticity of Supply2:50

Rencontrer les enseignants

Dr. José J. Vázquez-Cognet
Clinical Professor
Department of Economics

[music]. .

>> Hello, I'm Doctor Jose Vazquez, and now we're going to do the price elasticity of

supply. And the price elasticity of supply is

elasticity as any other. So remember that the elasticities is

always going to be the percent of change in one variable, let's say y, oh on the

percentage change in another variable, let's call that x.

And now we're just simply trying to figure out what is the percent of change on the

quantity supply, response as a percent of change in the quantity of the price, on

the price, right? So we're going to write it a price

elasticity of supply is going to be the percent of change in the quantity of x

supply, in response to a percent of change in the price of x.

So if the, since the supply curve is upwards sloping, right for a, for any

good, then the value of this elasticity here is going to be a positive number.

And, you know, the larger the number is the more elastic the, the supply is, and

the smaller the number is, the more price inelastic the supply is.

If you want to see it in the graph, and sometimes that helps kind of an inelastic

supply would be, in the extreme, would be fairly steep, like this.

And when your price changes from P1 to P2, your supply barely changes.

It's a very, it's kind of an inelastic supply.

And an elastic supply, a more elastic supply is going to be kind of flat.

Rise, so let's say, like that. So when you have a small change in the

price, from P1 to P2, you're going to have a large change in the supply, right?

So it's, you know, if, if, I dunno if you watched the video on demand before.

You didn't have to, but you can. If, if you watch the video on demand, this

should be pretty straight forward. The definition of, of price elasticity of

supply is the same as price elasticity of demand, it's just supply to supply.

But if you haven't seen the video on demand we're trying to basically measure

the rate of change of supply to a change in the price.

. [music].

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[music].

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