How does the quantity supplied of a good with a large elasticity of supply react to a price change?
Isn't it amazing on the Walmart Shelf (things advertised on TV) are so cheap?
Err, I still don't understand?
What I am saying, if it is easy to make (say a plastic wonder kitchen tool) that is made in great quantity, once demand drops, the price drops dramatically. The items are virtually worthless. Walmart sells them.
So the quantity supplied moves down the supply curve?
yes.
The quantity supplied of a good with a large elasticity of supply reacts significantly to a price change. To understand why, let's first define what elasticity of supply means.
Elasticity of supply measures the responsiveness of the quantity supplied to a change in price. It indicates how much the quantity supplied of a good changes in response to a given percentage change in price. Elasticity of supply can be expressed as a numerical value, where a value greater than 1 indicates elastic supply and a value less than 1 indicates inelastic supply.
Now, when the elasticity of supply is large (greater than 1), it means that the quantity supplied is highly sensitive to price changes. In practical terms, this means that when the price of a good increases, suppliers are quick to respond by increasing the quantity they are willing and able to supply. Conversely, when the price falls, suppliers are equally quick to reduce the quantity they are willing to supply.
The reason for this responsiveness lies in the characteristics of the production process. Goods with high elasticity of supply are often those that are easy and cost-effective to produce or have readily available inputs. This allows suppliers to adjust their production levels swiftly in response to changing market conditions.
To sum up, when the elasticity of supply is large, a price increase stimulates a substantial increase in the quantity supplied, while a price decrease leads to a significant reduction in the quantity supplied. This responsiveness is driven by the ease and efficiency with which suppliers can adjust their production levels in response to changing prices.