Five Elasticity Alternatives

Five Supply Curves

• 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, Please

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.