Q:

What is the main determinant of supply elasticity?

A:

Quick Answer

A product's supply elasticity is determined by several factors, including the length of time to produce the good, availability of production inputs, ease of storage of the finished product, excess production capacity and mobility of the production factors. Price elasticity of supply indicates the supplied quantity's responsiveness to price changes.

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Full Answer

A product's supply is considered inelastic if changes in its market price have little or no impact on the amount of the product that is supplied. Agricultural products, for example, are relatively inelastic because farmers cannot react to a price change by increasing supply, since the supply has a lengthy production period.

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