Supply elasticity is the change in supply costs at a particular price. If the supply changes little with a change in price, then supplies are considered inelastic. Supply is elastic if there are large changes in supply for a small change in price.
For example, the supply of land is inelastic because no one is making any more of it. By contrast, the supply of software is fairly elastic since it costs very little to make and distribute copies of software over the internet.
An elastic supply curve has a more gradual slope while an inelastic supply curve has a steeper slope.
Sellers want to sell land, and so small changes in price are not going to heavily influence the supply of land for sale. The supply of land is inelastic because, as Will Rogers once said, they’re not making any more of the stuff.<< Back to Glossary Index