Economics Elasticity in Economics Is Term Paper

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(Png; Lehman, 2007)

As far as supply is concerned, if one were to assume that all the firms within an industry, like for example, in a government holding, are identical, then a market supply curve would be made up of the supply curves of all the supply curves of the individual producers in the country. (Adams; Periton, 2006) the elasticity of demand therefore measures the responsiveness of the demand to the changes in the factors that may affect demand. Therefore, this means that the elasticities of demand can be estimated for price, income, prices of related products or services, and the advertising expenditure needed. (Png; Cheng, 2001) as far as the factors affecting elasticity of supply are concerned, one must note that the longer the time one takes over the supply of a product or a service, the more elastic the supply becomes. Supply is stated to be elastic if it is found that it is easier to transfer resources in production from other goods to the good in question. Take for example a company that manufactures dinner plates. In all probability, this particular company would also manufacture coffee mugs, and it would be a simple matter for the company to produce more coffee mugs, and lesser dinner plates. Would it be as easy for a company that neither produces dinner plates nor produces coffee mugs to enter the market? In all probability, the answer would be 'no' because of entry barriers.

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("Factors affecting elasticity of supply," n. d.)

The value of the price elasticity of supply is stated to be positive, because of the fact that an increase in price would most likely also increase the quantity that is supplied to the market. This would thereafter depend upon these factors: does the company possess spare capacity, and if so, how much? If there is plenty of spare capacity, then this would mean that the firm, either a private enterprise or a government holding, would be able to increase its output without causing a rise in costs, thereby making sure that supply remains elastic. Similarly, if the stock position is high, then this would mean that the firm would be able to increase its supply for the demand rather quickly, and therefore, supply would be elastic. This means that if capital and labor resources are also elastic, then the elasticity of supply for a product would also be higher than if these factors could not be changes quickly. ("Price elasticity of supply," n. d.) Thus it could be said that in this way, it is obvious that elasticity is important to firms and to governments......

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