(a) Price Elasticity of supply: “It is the ratio of percentage change in quantity ’ supplied over the percentage change in price of the commodity. Factors determining elasticity of supply: 

1. Chances of shifting from production: The size or degree of response depends on how easily producers can shift the production of another product to the one whose price has increased. When the producers can easily shift from one product to another, it means the supply would be more price elastic. 

2. Length of time: Producers cannot shift the production immediately because of a change in price of other products within the short duration. However, it may be possible to do so over a period of time. Hence, supply tends to be relatively inelastic in the short run and relatively elastic in the long run. 

3. Risk-taking: The elasticity of supply is determined based on the willingness of entrepreneurs to take risks. Supply is more elastic when entrepreneurs are willing to take risk and inelastic when they hesitate to take risk. 

(b) Internal debt and external debt: 

Internal debt means the government’s borrowings within the country. Individuals, banks, business firms and others are the various internal sources from which the government borrows. The various instruments of internal debt include market loans, bonds, treasury bills, ways and means and advances. 

External debt means the government’s borrowings from abroad. External debts are multilateral borrowings, bilateral borrowings, loans from the World Bank and the Asian Development Bank. It helps for various developmental programmes. 

Productive and unproductive debt: A debt is called productive if the loan is financed for projects which bring revenue to the government; for example, irrigation and power projects. Productive debts are self liquidating in nature; this means the principal amount and interest are normally paid out of the revenue generated from the projects for which the loans were used. A debt is called unproductive if the loan is financed for war and other relief operations in case of emergencies. Unproductive public loans are a net burden on the community. The government will have to resort to additional taxation for their servicing and repayment.