A key determinant of the price elasticity of supply is
The key determinant of the price elasticity of supply is the responsiveness of quantity supplied to a change in price. It measures how much the quantity supplied changes in response to a change in price.
To calculate the price elasticity of supply, you need to gather data on the initial quantity supplied and price, as well as the new quantity supplied and price after a change. Then, you can use the following formula:
Price Elasticity of Supply (PES) = Percentage Change in Quantity Supplied / Percentage Change in Price
To determine the key determinant of price elasticity of supply, you need to consider a few factors:
1. Time Period: The longer the time period, the more elastic the supply tends to be because producers have more time to adjust production levels. In the short run, it may be difficult for producers to quickly respond to changes in price and adjust their output.
2. Availability of Inputs: The availability of inputs, such as raw materials or labor, can influence the elasticity of supply. If inputs are easily accessible, the supply is likely to be more elastic as producers can increase or decrease production more easily.
3. Production Capacity: The level of production capacity and flexibility can affect supply elasticity. If producers have excess production capacity and can quickly increase output, the supply will be more elastic.
4. Mobility of Resources: The ease with which resources can be reallocated between different uses or locations also affects the elasticity of supply. If resources can be easily shifted to meet changes in demand, supply will be more elastic.
By considering these factors and analyzing the specific circumstances of a market, you can determine the key determinant of price elasticity of supply.