Price Elasticity of Supply on a Graph: Videos & Practice Problems

Supply curves exhibit varying elasticities, starting from perfectly elastic, represented by a horizontal line, to perfectly inelastic, depicted as a vertical line. As the curve transitions from perfectly elastic to inelastic, it cuts through different axes: the price axis indicates elastic supply (elasticity > 1), the origin signifies unit elastic, and the quantity axis denotes inelastic supply. Understanding these distinctions is crucial for analyzing market behavior and the responsiveness of supply to price changes, which is essential in macroeconomic contexts like aggregate supply and demand management.

Price Elasticity of Supply on a Graph

Now let's see supply curves with different elasticities on the graph. So just like before, right, we're going to start here with perfectly elastic, and we've got this horizontal line just like we did when we were talking about price elasticity of demand. Right? We got a horizontal line for perfectly elastic. I had that silly little example to help you remember. Right? Oh, I'm feeling elastic. I feel so perfectly elastic. I'm laying in my bed. I'm super elastic right now. Perfectly elastic. I'm laying in my bed. I'm super elastic right now, right. That's when we have this horizontal line, and it works for supply just as it did with demand.

The only difference you're going to see here as we move through the supply curves is the way we rotate here, right. So we started, remember, with demand, we started with a perfectly elastic where we were laying down, right? We had the horizontal line and we started to move this way, right? Perfectly elastic, elastic, unit elastic, inelastic, all the way to perfectly inelastic, right. The only difference now, and that was because we had downward slopes, right, downward slopes on the demand curve, the supply curve slopes upward. So we're going to do the same thing except the other way. We start perfectly elastic, and we're going to start going this way, right. Perfectly elastic, elastic, unit elastic, inelastic, all the way to perfectly inelastic standing up. Right? So it's going to be the same thing, just the way we rotate is different because supply curves slope upward.

So let's go ahead and see what's happening here. From perfectly elastic here to elastic, a good way to remember this, this is the way I do it, is you just look at which axes the line cuts through. So here we have a, if this is our price axis and our quantity axis, it's cutting through the price axis. When it cuts the price axis, that is when it's elastic, right? That's when we're going to have cuts price axis is what I meant to write. That's when we have elastic supply, price elasticity of supply that's greater than 1. Alright.

So let's keep on going here with unit elastic. This is where it cuts through the origin, right? So notice if we extend this line out it's going to cut right here through the origin, right where the price and quantity axes meet, right? So I'm going to write here cuts through origin and notice this is a unit elastic supply, but so is this. If I had a supply like this, as long as it's cutting through the origin. Right, if I have the line like this cutting through the origin or this way cutting through the origin, those are still unit elastic. Right? As long as it cuts through the origin, it is going to be unit elastic.

Alright, now let's go with inelastic. Inelastic, now we're cutting through the quantity axis, right. Now see where the line cuts right here and notice how we're getting steeper and steeper too, right. So we've got our price axis, our quantity axis, and it cuts quantity axis, I'm going to write. Right?

And then finally our perfectly inelastic where we're standing straight up again, right, just like we had with demand, except this time I guess it's kind of silly because we're kind of getting up the other way, right? So like our kinda heads gonna be like I don't know, we're gonna be upside down at the end, something like this. So it's a little sillier in this case I guess, but the idea remains the same. Perfectly elastic, we're laying down, and we're making our way from here up to here, right. That is what the different supply curves are going to look like on the graph. Let's go ahead and move on.

Here’s what students ask on this topic:

What is the price elasticity of supply and how is it represented on a graph?

Price elasticity of supply measures how much the quantity supplied of a good responds to a change in its price. On a graph, it is represented by the slope of the supply curve. A perfectly elastic supply is shown as a horizontal line, indicating that any price change results in an infinite change in quantity supplied. A perfectly inelastic supply is depicted as a vertical line, meaning quantity supplied does not change regardless of price. Elastic supply curves cut through the price axis, unit elastic curves cut through the origin, and inelastic curves cut through the quantity axis.

How do you determine if a supply curve is elastic, unit elastic, or inelastic?

To determine the elasticity of a supply curve, observe where the curve intersects the axes. If the supply curve cuts through the price axis, it is elastic (elasticity > 1). If it cuts through the origin, it is unit elastic (elasticity = 1). If it cuts through the quantity axis, it is inelastic (elasticity < 1). The steeper the curve, the more inelastic it is, while a flatter curve indicates greater elasticity.

What does a perfectly elastic supply curve look like and what does it signify?

A perfectly elastic supply curve is represented by a horizontal line on a graph. This signifies that suppliers are willing to supply any quantity of the good at a specific price. Any change in price would result in an infinite change in the quantity supplied. This situation is rare in real markets but can occur in highly competitive markets where suppliers can easily adjust their production levels.

What is the significance of a unit elastic supply curve?

A unit elastic supply curve is significant because it indicates that the percentage change in quantity supplied is equal to the percentage change in price. On a graph, this curve cuts through the origin. This means that a 1% increase in price results in a 1% increase in quantity supplied, and vice versa. Understanding unit elasticity helps in predicting how changes in price will affect supply in the market.

How does the slope of the supply curve relate to its elasticity?

The slope of the supply curve is directly related to its elasticity. A flatter slope indicates a more elastic supply, meaning quantity supplied is highly responsive to price changes. Conversely, a steeper slope indicates a more inelastic supply, meaning quantity supplied is less responsive to price changes. Perfectly elastic supply is a horizontal line, while perfectly inelastic supply is a vertical line.