Elasticity of Supply

We can also apply the elasticity concept to the supply curve. We would use the "elasticity of supply" to measure the response of the supply curve to a change in price. The formula for the "elasticity of supply" is

This looks very much like the price elasticity of demand, except that (1) the numbers would be for a movement along the supply curve, and (2) the sign would normally be positive.

Suppose the price of beer increases from 80c per gallon to 90c (using the example from the last chapter) and the quantity supplied increases from 1304 to 2894. Then the elasticity of supply is (2894-1304)/1304 divided (90-80)/80. That is 1.22/0.125 = 9.76.