Factors determining elasticity of supply

            The elasticity of supply depends upon the following factors:

(1)  Cost of Production: The supply of a commodity would be more elastic if with the increases, its marginal cost increases. On the contrary if with the increase in its output the marginal cost of the commodity falls, the supply would be less elastic or inelastic.

(2)  Nature of Commodity: Whether the supply is more elastic or less elastic depends upon the nature of the commodity. If the commodity is highly perishable like milk, fresh fish, fresh fruit, etc., supply would be less elastic or inelastic. But if the commodity is durable, its supply will be more elastic. It is so because in this case the quantity supplied can be increased or decreased according to the changes in the price.

(3)  Availability of more than one market: Elasticity of supply of a commodity also depends on the availability of more than one market to the seller of the commodity. When the price of the commodity falls in one market, it can be sold in the other markets and so the supply will be more elastic.

(4)  Technique to Production: If the process of production of a commodity is round about and highly specialised its supply is less elastic. It is obvious because the quantity supplied cannot be easily expanded or contracted. But if the supply of the commodity can be easily adjusted with the change in its price, its supply would be more elastic.

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