Perfectly elastic demand shows a horizontal line. If a very short period or momentary period is considered, the supply curve will be perfectly inelastic (Q1S1curve), where quantity supplied does not change even if price changes. Extractive industries come somewhere between the two: Various types of mining, oil production and forestry can only alter their production plans slowly and, therefore, at any given time, have relative inelastic supply conditions. The curve which is shown in figure 1000 indicates for a given change in price there is a greater change in supply.

tax benefits or building social housing. This sort of supply curve is conceived when we consider the supply curve of land from the viewpoint of a country, or the world as a whole. Therefore, the more inelastic the demand is the more steeper the curve is. This indicates quantity of demand will remain the same and does not depend on any change in price. Through graph 1.1, the demand curve D1 shift to the right D2 indicates that when there is more demand on properties.

This fact can be achieve by the non-price determinant factor, i.e. Elasticity of demand shows the changes to demand in relation to the price. Diagram: Perfectly Inelastic Demand Curve. The housing market of any country or places is determined by a range of demand and supply factors. tax benefits or building social housing. Graph 1.8 Perfectly Elastic Supply Curve Diagram. For any straight line positively-sloped supply curve drawn through the origin, the ratio of P/Q at any point on the supply curve is equal to the ratio ∆ P/∆ Q. In another hand, to decrease the demand will depends on the non-price determinant, i.e. To quantify such change we require the concept of elasticity of supply that measures the extent of quantities supplied in response to a change in price. The supply curve is upward sloping, but to determine the supply for housing, it is mostly decide by the house prices; therefore when house prices are high, this will encourage more people to built houses and the curve will shift itself as an increase or decrease in supply. SS1 curve drawn in Fig. Another extreme is the completely or perfectly inelastic supply or zero elasticity. The product's supply curve is vertical. Thus we can write NQ/QA instead of AB/BC. As in the case of demand, elasticity of supply also depends on the definition of the commodity. When prices of housing are expected to fall the quantity demand will decrease because buyers will wait for a lower prices and therefore will decrease the demand which will shift the demand curve onto the left D1 to D2. The most important issue to determine the supply whether is elastic or inelastic, time tends to be the main matter, in long term supply the quantity of houses will increase and it will therefore becoming more elastic. For example, when advance building technology takes place, it is a way that can reduce the cost on building houses, and increasing the revenue for suppliers, the supply curve S1 will ultimately shift to the right S2, as shown in graph 1.0, this represents an increase in the quantity supply at each and every price such as using the prefabrication technique, it will reduce the construction period and labour cost comparing with the in-situ technique. By clicking “Proceed”, you agree to our terms of service and privacy policy.

When the quantity of supply is greater than increase in price, then the price elasticity is described as elastic. The firm can supply an unlimited amount of product at that price. Here we are concerned with certain factors which affect elasticity of supply viz., the nature of the good, the definition of the good, the relevance of the time period, and so on. View FREE Lessons! Determinants. As with demand elasticity, the most important determinant of elasticity of supply is the availability of substitutes. The property types can differentiate as house, flats, apartment, bungalows and etc. For example when government have announced to build more social housing, the houses will not be constructed immediately, because it takes time for the legal complexities, obtaining planning permission and also the construction period. P/Q), the two ratios cancel out each other. Here the supply curve has been drawn parallel to the horizontal axis. The supply curve is horizontal due to the quantity supplied does not affect with the price fluctuations. So supply becomes relatively inelastic. Perfectly elastic demand shows a horizontal line. Moreover, these assignments are performed by professional writers and researchers and can serve as exemplars of quality academic writing. The supply curve is horizontal due to the quantity supplied does not affect with the price fluctuations.

This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. Time also exerts considerable influence on the elasticity of supply. 4.18 depicts inelastic supply curve where quantity supplied changes by a smaller percentage than does price. These considerations become very important at times of full employment when the only available factors of production are those which can be attracted from other industries and uses. This is shown in Fig. Elasticity of supply in such case will be infinite. ; What is the formula for calculating price elasticity of supply? This usually involves raising the prices of these resources. Learn How to Order Essay Online. But how much supply will rise in response to an increase in price cannot be known from the law of supply. But for non-durable goods and perishable goods elasticity of supply tends to be very low. In agriculture, production plans have to be made months or even years ahead and they cannot be altered quickly.

4.17). As a general rule, the more easily the factors can be transferred from the production of one good to that of another, the greater will be the elasticity of supply. This means that elasticity in demand is perfect, the reason for that is when there is any change in price and the demand slightly decline or nothing, then the price elasticity of the product is infinity. Through graph 1.1, the demand curve D1 shift to the right D2 indicates that when there is more demand on properties.

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