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Explain briefly the factors determining elasticity of supply. |
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Answer» Following are the factors determining elasticity of supply : 1. Nature of the commodity – Durable goods, generally, have elastic supply while perishable goods have inelastic supply because their supply cannot be increased or decreased as a result of a change in their prices. 2. Time – Shorter time period involved in production makes the supply inelastic while longer period makes the supply elastic because more time is available to make changes in production. 3. Technique of production – Supply of commodities involving simple technique of production have elastic supply and commodities having complex techniques of production have inelastic supply. 4. Future expectations – If the prices are expected to fall in future, the supply will be elastic. If the prices are expected to rise in future, producers will withhold the supply and supply will be inelastic. |
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