Explain the types of price elasticity of supply.

The law of supply tells us only the direction of change: when price rises, supply rises. It does not tell us how much supply changes. That degree of change is measured by the price elasticity of supply (Es), the ratio of the percentage change in quantity supplied to the percentage change in price:

Es = Percentage change in quantity supplied ÷ Percentage change in price = (ΔQ / ΔP) × (P / Q)

Because price and supply move together, Es is positive. The five types can be compared on a single diagram, where all five supply curves pass through the same point A:

1. Perfectly elastic supply (Es = ∞): at a given price, producers are willing to supply an unlimited quantity, but at even a slightly lower price they supply nothing. On the diagram it is the horizontal line through A.
   Schedule: at Rs. 100, supply is 100, 500 or 1,000 units, any amount; below Rs. 100, supply is zero.
   This is mostly a theoretical case, close to a perfectly competitive firm in the long run.
2. Relatively elastic supply (Es > 1): a given change in price causes a more than proportionate change in supply. The curve is flatter and starts from the price axis.
   Schedule: price 100 → 110 (+10%), supply 100 → 125 (+25%), so Es = 25 ÷ 10 = 2.5.
   Examples are plastic goods, garments and noodles, whose output can be raised quickly with spare capacity.
3. Unitary elastic supply (Es = 1): supply changes in exactly the same proportion as price. The curve is a straight line through the origin O.
   Schedule: price 100 → 110 (+10%), supply 100 → 110 (+10%), so Es = 1.
   This is a borderline case between elastic and inelastic supply.
4. Relatively inelastic supply (Es < 1): a given change in price causes a less than proportionate change in supply. The curve is steeper and starts from the quantity axis.
   Schedule: price 100 → 110 (+10%), supply 100 → 104 (+4%), so Es = 0.4.
   Examples are tea from Ilam gardens or oranges from Dhankuta in the same season, because new plants take years to bear fruit.
5. Perfectly inelastic supply (Es = 0): supply does not change at all, whatever the price. On the diagram it is the vertical line through A.
   Schedule: price 100 → 110 or 150, supply remains 100 units.
   Examples are the number of seats in a cinema hall for one show, rare stamps and paintings, and land in a particular location.
6. Comparing the types at point A: all five curves pass through the same point A, but the flatter the curve, the more elastic the supply. Moving from the horizontal line (∞) through the flatter line (>1), the line through the origin (=1) and the steeper line (<1) to the vertical line (0), elasticity steadily falls.
7. Role of time: in the very short period supply is nearly fixed (Es close to 0). In the short period it becomes relatively inelastic, and in the long period, when firms can expand plants and new firms can enter, it becomes relatively elastic.
8. Measurement: Es is measured by the percentage method, (ΔQ / ΔP) × (P / Q), or by the arc method, which uses average prices and quantities. The arc method is preferred for large changes because it gives the same value in both directions.

Price elasticity of supply has five types, from perfectly elastic (∞) to perfectly inelastic (0). The flatter the supply curve, the more elastic the supply. In practice, most goods fall between these two extremes, and supply becomes more elastic as time passes.