How does Price Elasticity Affect Supply ?

Price elasticity of supply is a method used in economics to measure how the supply of goods and services changes with a change in their market price. It is a method to calculate the response of one variable (the supply of goods and services) to a change in another variable (price).

*In economics, elasticity refers to the percentage change in one economic variable in response to a change in another variable.

*Thus, elastic indicates that a product is sensitive to any change in the price, whereas inelastic means that a product remains unaffected by the price movements.

  • Thus, they move away from goods and focus less on less profitable goods. This results in an increased supply of highly valued goods and a reduction or decrease in the supply for goods that are considered less valuable.
  • This will result in an increase in apple prices and a decline in the price of mangoes. Observing this shift in the consumers' demand, the producers of fruits will decide to grow more apples and fewer mangoes since it can increase profits.

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