Factors Affecting Elasticity of Supply

• Time Lags After a Price Change

  The greater the amount of time that producers have to respond to a price change, the more elastic the supply
• Immediately After a Price Change

  A producer cannot change its level of resources immediately. Elasticity of supply would be almost perfectly inelastic.
• In the Short Term After a Price Change


  A producer can change some of its resources with ease, improving labour or using up excess capacity. Elasticity is likely to be relatively elastic.
• In the Long Term After a Price Change

  Producers can change all their FoP. Elasticity of supply will be relatively elastic
• Ability to Store Stock - Inventories

  The easier it is to hold stock, the more elastic the supply.

  • Supply is elastic when there is an ability to store inventories
  • Supply is inelastic when there is no ability to store inventories
• Excess Capacity

  • Supply is elastic when firms have excess capacity because they can respond quickly to an increase by utilising existing resources
  • Supply is inelastic when resources are being used at full capacity as firms are unable to force labour or capital to work harder