Elasticity of supply, or price elasticity of supply, measures the responsiveness of the quantity supplied of a commodity to the change in its price. It assists us in knowing the magnitude of the change in supply due to the change in its price.
Algebraically, it is calculated as:
where:
ΔQ represents change in the quantity supplied i.e. (Q2−Q1)
ΔP represents change in the price i.e. (P2−P1)
P1 represents the initial price
P2 represents the final price
Q1 represents the initial quantity supplied
Q2 represents the final quantity supplied
