
REALISM OF PERFECT COMPETITION: Perfect competition is an idealized market structure that does NOT exist in the real world. While some real world industries might come relatively close to a one or two of the four key characteristics of perfect competition, none matches all four sufficiently that we can declare a perfectly competitively industry. Some industries come close on the large number of small firms and the identical product characteristics. A few industries have relatively good, although not perfect, information about prices and technology. However, almost all industries fall far short of the perfect mobility characteristics.
Visit the GLOSS*arama




ELASTICITY AND SUPPLY INTERCEPT: The intersection of a straightline supply curve with vertical price axis and/or horizontal quantity axis reveals the relative price elasticity of supply. Intersection with the horizontal quantity axis means inelastic and intersection with the vertical price axis means elastic. Intersection with the origin means unit elastic supply. The positioning of a supply curve relative to the price and quantity axes indicates the price elasticity of supply. Unlike demand, a straightline supply curve does not contain all five elasticity alternatives. However, the elastic or inelastic nature of a supply curve is revealed by the intersection with the vertical price axis and/or horizontal quantity axis.Five Elasticity AlternativesFive Supply Curves 

 The elasticity of a supply curve depends on whether the supply curve intersects the price axis, the quantity axis, or the origin. The exhibit to the right can be used to illustrate the five elasticity alternatives. Perfectly Elastic: First up is perfectly elastic supply, which means an infinitesimally small change in price results in an infinitely large change in quantity supplied. The coefficient of elasticity for this alternative is E = ∞. A click of the [Perfectly E] button reveals a perfectly elastic supply curve, which is horizontal and intersects the vertical price axis.
 Relatively Elastic: Next up is relatively elastic supply, which means a relatively small change in price results in a relatively large change in quantity supplied. The coefficient of elasticity for this alternative is in the range of 1 < E < ∞. A click of the [Relatively E] button reveals a relatively elastic supply curve, which is flat but not horizontal and intersects the price axis.
 Unit Elastic: Third on the list is unit elastic supply, which means that any change in price is matched by an equal relative change in quantity. The coefficient of elasticity for this alternative is in the range of E = 1. A click of the [Unit Elastic] button reveals a unit elastic supply curve, which is a straight line extending from the origin.
 Relatively Inelastic: Next is relatively inelastic supply, which means a relatively large change in price is needed to induce a relatively small change in quantity supplied. The coefficient of elasticity for this alternative is in the range of 0 < E < 1. A click of the [Relatively In] button reveals a relatively inelastic supply curve, which is steep but not vertical and intersects the quantity axis.
 Perfectly Inelastic: Lastly is perfectly inelastic supply, means that quantity supplied is unaffected by any change in price. The coefficient of elasticity for this alternative is E = 0. A click of the [Perfectly In] button reveals a perfectly inelastic supply curve, which is vertical and intersects the horizontal quantity axis.
An Explanation, PleaseAn explanation of this connection between elasticity and intercept can be had with a closer look at the elasticity concept. Elasticity is comparison between the percentage changes in price and quantity. A percentage change depends on both amount of the change, or the unit change, and the starting point, or base value, of the change. Because slope is constant for a straightline supply curve, unit changes are always proportional for any of the supply curves displayed here.The difference in elasticity rests with the base values. For a supply curve that intersects the vertical price axis, price starts with a larger base value than quantity. As such, any subsequent price change is relatively smaller, compared to this larger base, than the quantity change. This results in a relatively elastic supply. For a supply curve that intersects the horizontal quantity axis, quantity starts with a larger base value than the price. As such, any subsequent quantity change is relatively smaller, compared to this larger base, than the price change. This results in a relatively inelastic supply. For a supply curve that goes through the origin, price and quantity start with equal zero values, and equal bases. As such, all subsequent price and quantity changes are proportional. This results in a unit elastic supply.
Recommended Citation:ELASTICITY AND SUPPLY INTERCEPT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 20002018. [Accessed: April 26, 2018]. Check Out These Related Terms...    Or For A Little Background...          And For Further Study...       
Search Again?
Back to the WEB*pedia



GREEN LOGIGUIN [What's This?]
Today, you are likely to spend a great deal of time looking for the new strip mall out on the highway looking to buy either an AC adapter that won't fry your computer or a case for your designer sunglasses. Be on the lookout for slow moving vehicles with darkened windows. Your Complete Scope
This isn't me! What am I?


Okun's Law posits that the unemployment rate increases by 1% for every 2% gap between real GDP and fullemployment real GDP.


"Sometimes when you innovate, you make mistakes. It is best to admit them quickly and get on with improving your other innovations. "  Steve Jobs, Apple Computer founder


AIFT American Institute for Foreign Trade


Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.
User Feedback

