Q:

In economics, what is a perfectly inelastic supply?

A:

Quick Answer

Elasticity of supply is the ability of the supply to change when other market forces, such as price and demand, change. If a supply remains unchanged when these other factors do change, it is known as an inelastic supply. Perfectly inelastic supply is a supply that is incapable of change regardless of the instability of surrounding market forces.

Continue Reading

Full Answer

On a traditional supply and demand curve, the supply curve is represented by a line that goes from right to left and intersects with a demand curve at an equilibrium point. With a perfectly inelastic supply, the supply curve would be a vertical line, parallel to the y-axis, that has only one value.

An example of a perfectly inelastic supply would be a rare book merchant who holds three copies of original Shakespeare manuscripts and needs to sell them before her shop goes out of business. Because Shakespeare is no longer alive, there can be no more new original Shakespeare manuscripts, and the merchant has no ability to change the supply of manuscripts in the shop. In this scenario, the merchant is compelled to sell these manuscripts, regardless of demand or price considerations, because failing to do so would only lead to larger losses.

Learn more about Business Resources

Related Questions

Explore