In our last blog, we covered about the definition of price elasticity of demand and price elasticity of supply,  relationship between revenue and different elasticity coefficient, and factors that affect the price elasticity of demand.

In this blog, we will firstly discuss the factors that will change the price elasticity of supply.

The first factor— time. As the time increase people normally will become less incentive to do their current job, especially for the job which have high repeatability and boring. Thus, the price elasticity of supply might be elastic at short run, but become inelastic in long run.

The second factor— the availability of resource. If this product require an extremely high cost to produce, which means a low availability of resource,  the price elasticity of supply will be inelastic. The quantity supply will change little bit with a large change in product’s price. If the cost of production is low, which means high availability of resources, the price elasticity of supply will be elastic. The quantity supply will change a lot with a small change in product’s price.

The third factor—difficulty of storage. If the product is easy to store, then it will be defined as elastic, because it can easily response the customers’ demand. However, If the product is not easy to store, then its will be defined as inelastic, suppler cannot response to consumers’ change in demand due to the lack of storage.

Like we covered in last blog, the price elasticity of supply coefficient can be calculated by the percentage change in quantity supply divided by the percentage change in price. If the price elasticity of supply coefficient equal to zero, that means the percentage change in price lead to no change in supply, and it will be defined as perfectly inelastic.

If the price elasticity of supply coefficient equal to infinity, that means the change in price will cause infinite change in supply, which will be defined as perfectly elastic.

If the price elasticity of supply coefficient greater than one, that means the percentage change in quantity supply is greater than the percentage change in price, which will be defined as elastic

If the price elasticity of supply coefficient is less than one, that means the percentage change in quantity supply is less than the percentage change in price, which will be defined as inelastic.

If the price elasticity of supply coefficient equal to one, that means the percentage change in quantity supply is equal to the percentage change in price, which will be defined as unitary elastic.

After the introduction of price elasticity of demand and price elasticity of supply, we will move to the next part— Externality.

Externality is defunded as the cost or benefit that affects the third party other than producers or consumers. Before the discussion of externality, we may need to focus on the private & social benefit, and the private & social cost

People always only see private benefits and costs while making decisions, so why dose the social cost and benefit matters? We will find that out in the next blog.