Factors Affecting Elasticity
There are several factors that can affect the elasticity of a supply curve in a particular market. Once again, as you read through this list you should try to think of ways that you can connect the factors to unique markets that you know.
- Ability to store – some items can be made in large quantities and then stored. For this to occur, the business must have the capacity to store any extra production that they make. For example, coal, wheat and wine are often processed in larger quantities than immediately required, and the excess production is stored. As a result, suppliers are more easily able to respond to a small change in price to take profits – leading to a more elastic supply curve. On the other hand, services can not be stored at all, and as a result the supply curve may be relatively inelastic.
- Durability of goods – Put simply, some products will "go off" if we try to store them for an extended period. Items that are considered durable are more likely to have an elastic supply curve, while products like milk and bread will have a relatively inelastic supply curve. Note the difference between this point at the first one; the business will have the "ability to store" if they have the capacity, while the "durability of the goods" is about how well the products will last.
- Production period - If it takes a long time to make a product, then it is more difficult for producers to respond quickly to changes in the market place. This can affect their willingness to respond to changes in price, and as a result it is more likely that the product will have an inelastic supply curve. On the other hand, if products can be produced in a very short period of time, then businesses will have the opportunity to increase their output when prices are good. This is more likely to result in an elastic supply curve.
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