While the price elasticity of demand is a reflection of consumer behavior as a result of price change, the price elasticity of supply measures producer behavior. Each metric feeds into the other.

Key Takeaways Price elasticity of supply indicates how quickly producers shift production levels in response to price changes.

Equilibrium represents the price point where businesses maximize sales to consumers. Elasticity of supply is often used in conjunction with the supply and demand model.

When a price rises sharply, business leaders must estimate how long it will take for increased supply and reduced demand to nudge prices back down.

Thus, elasticity represents the sensitivity of one change to another, pointing to the interdependence of both variables in the supply-and-demand curves.

Elasticity is a method of measuring the likelihood of one economic factor affecting another, such as when the price of an item affects consumer demand or when supply affects how much something costs.

A supply curve reveals if a commodity will experience a price increase or decrease based on demand. The supply curve is shallower, closer to horizontal, for products with more elasticity.

Related Terms: Elasticity; Product Costs Supply and demand is a fundamental factor in shaping the character of the marketplace, for it is understood as ...

Therefore, the laws of supply and demand matter. Let us make the explanation simple, with examples and easy-to-understand definitions.

Learn the basics of price elasticity of supply and demand and how each influences a company’s production of goods and pricing strategy.