Let us make an in-depth study of the measurement of elasticity of supply. In the measurement of elasticity, the following formulae are normally adopted:
In this way, in the measurement of elasticity of supply, percentage change in supply is divided by percentage change in price. If quotient comes to ONE, then the elasticity of supply is equal to unity.
If quotient is more than ONE, then the elasticity of supply is more than unity and if it is less than ONE, then Elasticity of Supply is less than unity.
1. When Elasticity of Supply is Equal to Unity:
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If there is percentage change in price is equal to the percentage change in supply, then the Elasticity of Supply will be equal to unity.
For example:
If price rises by 25% then in supply also there is rise of 25%.
2. When Elasticity of Supply is More than Unity:
If there is percentage change in supply more than the percentage change in price, then the elasticity of supply is more than the unity For example—If price changes by 50% and in supply rise is 75% then:
or, elasticity of supply is more by 1.5.
3. When Elasticity of Supply is Less than Unity:
or, elasticity of supply is less i.e., 0.5.
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or, it is less than unity.