elasticity of supply

  

Definition

Responsiveness of producers to changes in the price of their goods or services. As a general rule, if prices rise so does the supply.

Elasticity of supply is measured as the ratio of proportionate change in the quantity supplied to the proportionate change in price. High elasticity indicates the supply is sensitive to changes in prices, low elasticity indicates little sensitivity to price changes, and no elasticity means no relationship with price. Also called price elasticity of supply.


Use this term in a sentence

  • The elasticity of supply can be demonstrated by the company's willingness to open another factory to increase production if needed.

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  • It is important to know the elasticity of supply so that you can break down when you will need another shipment.

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  • We had to take a look at our elasticity of supply and see what we needed to do because we were having a few problems.

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