What does the price elasticity of supply mean? How do we measure it?
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Explanation:
Responsiveness of producers to changes in the price of their goods or services. ... Elasticity of supply is measured as the ratio of proportionate change in the quantity supplied to the proportionate change in price.
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Price elasticity of supply means the change in in the supply of quantity in relation to the change in the price of the quantity. Simply it can be defined as a change in supply with respect to the change in the price of a quantity.
It can be measured in two ways:
1) percentage method
2) the geometric method
The percentage method is easier and is the most commonly used method to calculate the price elasticity supply. It calculates by measuring the rate of percentage change of supply with a percentage change in the price.
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