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free solved assignment answer of Q.Define Elasticity of Supply? Explain the factors determining Elasticity of Supply?

Answer: Responsiveness of producers to changes in the price of their goods or services. As a general rule, if prices rise so does the supply.
Elasticity of supply is measured as the ratio of proportionate change in the quantity supplied to the proportionate change in price. High elasticity indicates the supply is sensitive to changes in prices, low elasticity indicates little sensitivity to price
changes, and no elasticity means no relationship with price. Also called price elasticity of supply.

The formula to calculate elasticity of supply is as follows:
ES = % change in Supply / % change in Price

Factors Determining Elasticity of Supply (Determinants of Elasticity of Supply

1. Time period: Time has a greater influence on elasticity of supply than on demand. Generally supply tends to be inelastic in the short run because time available to organize and adjust supply to demand is insufficient. Supply would be more elastic in the long run.
2. Availability and mobility of factors of production: when factors of production are available in plenty and freely mobile from one occupation to another, supply tends to be elastic and vice - versa.

3. Technological improvements: Modern methods of production expand output and hence supply tends to be elastic. Old methods reduce output and supply tends to be inelastic.

4. Cost of production: If cost of production rises rapidly as output expands, then there will not be much incentive to increase output as the extra benefit will be choked off by the increase in cost. Hence supply tends to be inelastic and vice-versa.

 5. Kinds and nature of markets: If the seller is selling his product in different markets, supply tends to be elastic in any one of the market because, a fall in the price in one market will induce him to sell in another market. Again, if he is producing several types of goods and can switch over easily from one to another, then each of his products will be elastic in supply.

6. Political conditions: Political conditions may disrupt production of a product. In that case, supply tends to become inelastic.

7. Number of sellers: Supply tends to become more elastic if there are more sellers freely selling their products and vice-versa.

 8. Prices of related goods: A firm can charge a higher price for its products, if prices of other products are higher and vice-versa. 

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