What determines elasticity of supply?

Economics Dec 18, 2020

Expert Solution

Factors which determines the elasticity of supply are as follows:

Number of producers- The number of producers in the market for a particular demanded good affects the elasticity of supply.
Spare capacity- If the demand of the product increases or decreases, it will shift the demand curve accordingly and thus affecting the supply.
Storage facilities- If the storage facilities for any product is available easily, the demand for the product is increased and thus affecting the supply.
Capital investment- When a firm invests in capital, the price of any product will increase and thus affecting the elasticity of supply.
Factor mobility-When a product is easily moved from the industry to the market, the supply curve is more elastic.

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