Theory question 105
Elasticity(a) What is price elasticity of supply?
(b) Differentiate between joint supply and competitive supply.
(c) Explain any four determinants of elasticity of supply.
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(a) Price elasticity of supply is the degree of responsiveness of quantity supplied to a change in the commodity's price: % change in quantity supplied ÷ % change in price.
(b) Joint supply: two goods produced together from one process, so more of one automatically gives more of the other (e.g. beef and hides, palm oil and kernel). Competitive supply: goods that compete for the same resources, so more of one means less of the other (e.g. cocoa and coffee on the same land).
(c) Any four: time period; nature/perishability of the good; availability of spare capacity and stocks; mobility of factors; length of production period; cost of production; ease of entry of new firms; government policy.
Joint: produced together; competitive: compete for resources.