Meaning of Elasticity of Supply:

The law of supply says that the supply varies directly with the price. If
the price rises, the quantity offered will extend, and as it falls the
quantity offered will contract. This attribute of supply, by virtue of
which it extends or contracts with a rise or fall in price, is known as
the Elasticity of Supply. It refers to the sensitiveness or responsiveness
of the supply to changes in price.

The law of supply indicates the direction of change—if price goes up,
supply will increase. But how much supply will rise in response to an
increase in price cannot be known from the law of supply. To quantify
such change we require the concept of elasticity of supply that
measures the extent of quantities supplied in response to a change in
price.

Elasticity of supply measures the degree of responsiveness of quantity

supplied to a change in own price of the commodity. It is also defined
as the percentage change in quantity supplied divided by percentage
change in price.

It can be calculated by using the following formula:

ES =

Percentage change in quantity supplied / Percentage change in price

Symbolically,

ES = ∆Q / Q ÷ ∆P / P = ∆Q / ∆P × P / Q

Since price and quantity supplied, in usual cases, move in the same
direction, the coefficient of ES is positive.
Types of Elasticity of Supply:
The degree of change in the quantity supplied with respect to change
in the price of a product varies in different situations.

Following are different types of elasticity of supply:

(a) Perfectly Elastic Supply:

Refers to a situation when the quantity supplied completely increases

or decreases with respect to proportionate change in the price of a
product. In such a case, the numerical value of elasticity of supply
ranges from zero to infinity (eS = 00). This situation is imaginary as
there is no as such product whose supply is perfectly elastic.
Therefore the situation does not have any practical implication. In
such a case, the price remains constant as the price of a product does
not affect the quantity supplied. Let us understand the concept of
perfectly elastic demand with the help of an example.

The numerical value of elasticity of supply, in exceptional cases, may

reach up to infinity. The supply curve PS drawn in Fig…… has an
elasticity of supply equal to infinity. Here the supply curve has been
drawn parallel to the horizontal axis. The economic interpretation of
this supply curve is that an unlimited quantity will be offered for sale
at the price OP. If price slightly drops down below OP, nothing will be
supplied

Supply Schedule
Price Quantity Supplied

10 20

10 40

10 60
(b) Perfectly Inelastic Supply (ES = 0):

Price Quantity Supplied

10 40

20 40

30 40

Another extreme is the completely or perfectly inelastic supply or zero

elasticity. SS1 curve drawn in Fig…… illustrates the case of zero
elasticity. This curve describes that whatever the price of the
commodity, it may even be zero, quantity supplied remains unchanged
at QM. This sort of supply curve is conceived when we consider the
supply curve of land from the viewpoint of a country, or the world as a
whole.

(c) Unit Elasticity of Supply (ES = 1):

Price Quantity Supplied

10 30

20 50

30 70

If price and quantity supplied change by the same magnitude, then we

have unit elasticity of supply. Any straight line supply Curve passing
through the origin, such as the curve ON shown in Fig….., has an
elasticity of supply equal to 1. This can be verified in this way.

For any straight line positively-sloped supply curve drawn through the
origin, the ratio of P/Q at any point on the supply curve is equal to the
ratio ∆ P/∆ Q. Note that ∆ P/∆ Q is the slope of the supply curve while
elasticity is (1/∆P/∆Q = ∆Q/∆P).Thus, in the formula (∆Q/∆P. P/Q),
the two ratios cancel out each other.