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DETERMINANTS OF PRICE ELASTICITY
OF SUPPLY
Time
More time for producers
to respond to the  price
more price elastic
Less time for producers to respond to the price
less price elastic
Ease of Storage
Easy and cheap to store
the product
more price elastic
Difficult and expensive to store the product
less price elastic
Available Excess Capacity
A lot of extra room in
the factory
more price elastic
Little extra room in the factory
less price elastic
Characteristics of the Production
Process
Easy to expand capacity
more price elastic
Difficult to expand capacity
less price elastic
DETERMINANTS OF PRICE ELASTICITY
OF DEMAND
Number of Substitutes
Many
more price elastic (like a Big Mac)
Few
less price elastic (like gasoline)
Luxury or Necessity
Luxury
more price elastic (like a new car)
Necessity
less price elastic (like gasoline)
Price of the Product as a Percent of
Consumer Income
Price is a large percent
of consumer income
more price elastic
(like a new car)
price is a small percent of consumer income
less price elastic
(like salt)
Time
Long time between
price
and when we measure quantity
more price elastic
Short time between price
and when we measure quantity
less price elastic
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