(a) What is price elasticity of supply?(2marks) (b) Differentiate between joint supply and cometitive supply.(6marks) (c) Explain any four determinants of e...

Answer Details

(a) Price elasticity of supply is the degree of responsiveness of the quantity supplied of a commodity to a change in its price. It is measured as

(b) Joint supply versus competitive supply

• Joint supply occurs when two or more goods are produced together from a single production process, so producing more of one automatically yields more of the other. Example: rearing cattle gives both beef and hides.
• Competitive (rival) supply occurs when goods compete for the same productive resources, so producing more of one means less of the other can be produced. Example: using a piece of land for maize leaves less land for yam.

(c) Four determinants of elasticity of supply

• Time period: supply is more elastic in the long run, when producers can adjust all factors, than in the short run.
• Availability of spare capacity and factors of production: if idle resources and inputs are readily available, output can be raised quickly, making supply elastic.
• Ease and cost of storing the good: goods that can be stored cheaply have more elastic supply, since stocks can be released when price rises.
• Gestation (production) period: goods that take a long time to produce, such as tree crops, have inelastic supply because output cannot respond quickly to price.