Explain whether you think the supply of the following goods is elastic or inelastic, and why.
(a)Hotel Rooms
(b)Taxi Rides
(c)Photographs
To determine whether the supply of a good is elastic or inelastic, we need to consider how responsive the quantity supplied is to changes in price or demand. Let's analyze each good individually:
(a) Hotel Rooms:
The supply of hotel rooms can be considered elastic. This means that the quantity of hotel rooms supplied is relatively responsive to changes in price or demand. There are a few reasons for this. First, hotels have the ability to adjust their room rates based on the level of demand. When demand increases, hotels can quickly add more rooms to their inventory or increase the occupancy rate to meet the higher demand. Conversely, if demand decreases, hotels can lower prices to encourage reservation bookings. This flexibility in adjusting prices and quantity allows hotels to respond to changes in demand and maintain a balance between supply and demand.
(b) Taxi Rides:
The supply of taxi rides can be considered inelastic. This means that the quantity of taxi rides supplied is not very responsive to changes in price or demand. Taxi services typically have a limited number of vehicles and drivers available at any given time. They operate on a fixed capacity, which makes it difficult to quickly adjust the supply of taxi rides in response to changes in demand. Even if there is a surge in demand, taxi services may reach their maximum capacity, resulting in a limited ability to increase the number of rides offered. Consequently, the supply of taxi rides tends to be relatively inelastic.
(c) Photographs:
The supply of photographs can be considered elastic. With advancements in digital technology and the ease of printing, the quantity of photographs that can be produced and supplied has become highly responsive to changes in price or demand. Photographers can quickly adjust their production levels based on the demand for their photographs. If there is an increase in demand, they can produce more copies or offer additional prints. Likewise, if demand decreases, they can scale back their production to avoid excess inventory. This flexibility allows photographers to adapt to changes in demand, making the supply of photographs elastic.
It is important to note that these categorizations are generalizations and can vary depending on specific circumstances or market conditions. The responsiveness of supply can be influenced by various factors, including production capacity, availability of inputs, technology, and timeframes considered.