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Price elasticity of supply
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==Determinants== ;Availability of raw materials: For example, availability may cap the amount of gold that can be produced in a country regardless of price. Likewise, the price of [[Van Gogh]] paintings is unlikely to affect their supply.<ref name="Parkin84">Parkin; Powell; Matthews (2002). p.84.</ref><!-- Have you not a slightly less better example? --> ;Length and complexity of production: Much depends on the complexity of the production process. Textile production is relatively simple. The labour is largely unskilled and production facilities are little more than buildings β no special structures are needed. Thus the PES for textiles is elastic. ;Mobility of factors: If the factors of production are easily available and if a producer producing one good can switch their resources and put it towards the creation of a product in demand, then it can be said that the PES is relatively elastic. The inverse applies to this, to make it relatively inelastic. ;Time to respond: The more time a producer has to respond to price changes the more elastic the supply.<ref name="Parkin84"/><ref name="Samuelson 2001">Samuelson; Nordhaus (2001).</ref> Supply is normally more elastic in the [[long run]] than in the [[short run]] for produced goods, since it is generally assumed that in the long run all [[factors of production]] can be utilised to increase supply, whereas in the short run only labor can be increased, and even then, changes may be prohibitively costly.<ref name="png" /> For example, a cotton farmer cannot immediately (i.e. in the short run) respond to an increase in the price of soybeans because of the time it would take to procure the necessary land. ;Inventories: A producer who has a supply of goods or available storage capacity can quickly increase supply to market. ;Spare or excess production capacity: A producer who has unused capacity can (and will) quickly respond to price changes in his market assuming that variable factors are readily available.<ref name="png" /> The existence of spare capacity within a firm, would be indicative of more proportionate response in quantity supplied to changes in price (hence suggesting [[price elasticity]]). It indicates that the producer would be able to utilise spare factor markets ([[factors of production]]) at its disposal and hence respond to changes in demand to match with supply. The greater the extent of spare production capacity, the quicker suppliers can respond to price changes and hence the more price elastic the good/service would be.
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