Supply price elasticity measures sellers' sensitivity to changes in price. When price changes have a large impact on supply, we say that supply is price elastic, with small price increases supply will increase considerably. We say that an offer is perfectly elastic when from a certain price level, suppliers have bid as much as possible. In the short term, however, firms bump into structural factors to deliberately increase their supply. For example, a factory has a short-run maximum production limitation. In the short term, the factory may grow its plant and buy more machines, but in the short term from one point the supply is more rigid.
There are, however, some exceptions. In the case of natural monopolies, such as water supply, the increase in price may increase supply indefinitely. This is a case where, in the short run, price elastic supply can be infinitely elastic. Thus, rising prices can increase the amount of water supplied as much as demanded by consumers. This is because the marginal cost of supplying more water is low for the firm.
Note: marginal cost is the cost of manufacturing one more unit of the product supplied. In the case of water, the marginal cost of providing 1 unit of water measurement is very low.
Mostly, internet companies are the perfect example of infinite elasticity of supply in the short term.
The price elasticity of supply means the responsiveness change in the quantity supplied in response to change in price of a particular commodity.
Formula for price elasticity of supply:
[tex]\rm{Q_s}=\dfrac{\rm{\%\triangle Q}}{\rm{\%\triangle p}}[/tex]
Price elasticity of supply determines sensibility of the seller to changes in price.
When price changes have a bigger impact on supply, means that supply is price elastic, with small price increases supply will increase substantially. Means that an offer is perfectly elastic from a certain price level, suppliers have to offer as much as possible.
In the short term, however, firms hit into structural factors to advisedly increase their supply.
However, some exceptions will be there that, In the case of natural monopolies, like water supply, the increase in price may increase supply indefinitely. This is a case where, in the short run, price elastic supply can be infinitely elastic.
Thus, improving prices can increase the amount of water supplied as much as demanded by consumers. This is because the marginal cost of supplying more water is low for the firm.
Therefore, there are some industries that impact its supply in short run.
Learn more about supply, refer:
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