Factors Affecting Supply Elasticity
Supply elasticity relies on a variety of considerations, which are as follows:
The essence of merchandise:
Supply elasticity depends on the quality of the component. Commodities may be graded as Perishable and Durable Perishable products on the basis of their existence and (ii) Durable Perishable products may not be processed and therefore their stock does not react to the change in their stock. On the other side, flexible goods should be processed, but their supply is usually elastic, i.e., the supply reacts to price increases.
Supply elasticity is often affected by manufacturing prices. If manufacturing is subject to the law of increasing costs, then the supply of such goods would be inelastic. Because of the increase in price, it is impossible to expand supply because supply requires increasing bad costs. On the opposite, if output complies with the law of falling prices, then it would be elastic in its availability.
The Projected Rates Forecasts:
Future price adjustment projections will also impact the production of a commodity as the suppliers expect the costs to increase in the future if they are willing to hold on to the stocks of the goods and not make the product available for sale on the market. Supply would be inelastic in nature in such a situation. On the opposite, production will, if costs are projected to decline in the future, achieve elasticity.
Easy manufacturing processes are less costly in design, by and wide. The availability of such goods, including basic manufacturing processes, is typically elastic. On the other hand, if the manufacturing processes of a commodity are slow, complicated, and time-consuming in nature, the supply of those goods will be less elastic in general.
The time factor has an important impact on supply elasticity. The longer the period, the more elastic the supply is., On the other hand, the shorter the time span would lower the supply elasticity. Analyzing the effect of time on supply elasticity.
Nature of entries:
Supply elasticity depends on the quality of the inputs that are used to manufacture the component. If the manufacturing of material uses inputs that are widely used to manufacture other goods, a more elastic supply would appear to be available. On the other hand, if it uses advanced inputs that are only appropriate for its processing, the supply would be comparatively inelastic.
The elasticity of supply is often determined by the ability of entrepreneurs to take risks. On the other hand, if entrepreneurs are able to take risks, the supply will be more elastic, and if entrepreneurs are willing to take risks, the supply will be inelastic. Their risk-taking would be partially affected by the scheme of output incentives and taxes. On the other hand, the high rate of taxes will minimize supply elasticity and, in the case of high subsidy rates, supply will be more elastic.