Elasticity of Supply of Different Products | tutor2u Economics
Study notes

Elasticity of Supply of Different Products

  • Levels: AS, A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

Elasticity of Supply is a measure of the sensitivity of (quantity) supplied of a good or service to a change in the price of that good or service.

The supply of manufactured goods tends to be more price elastic than the supply of agricultural goods:

Manufactured products

  • Mass production using integrated production lines
  • Easier to store finished goods
  • Firms have spare capacity / extra production shifts
Agricultural goods
  • Harder to store because goods are often perishable
  • Growing seasons mean production period is longer
  • Unpredictable supply because of volatile climate
New house-building in the UK

Low price elasticity of supply for new housing

Production time frame:

  • It can take years for a housing project to be completed
  • Delays in planning process e.g. if local people complain
Limited spare capacity / low stock levels:
  • Housing supply can be restricted by shortages of skilled labour 
  • Other factor inputs used in construction such as cement, bricks may also be in scarce supply
The supply of new housing is inelastic. 
Therefore house prices are determined mainly by demand-side factors

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