Different producers respond differently to a given change in the price of a commodity. Elasticity of supply explains reactions of producers to a particular change in price.
There are five types of elasticity of supply:
(1) Perfectly Elastic (Es =?):
Supply of a commodity is said to be perfectly elastic, when the supply changes to any extent irrespective of any change in its price. It means that at a price, any quantity of the good can be supplied. But, at a slightly lower price, the firm will not sell at all. It is purely an imaginary concept and can only be explained with the help of an imaginary supply schedule.
In this case, the elasticity of supply is infinity and the supply curve is a straight line parallel to the X-axis as shown in Fig. 3.8. Price remains OP irrespective of changes in supply. In this case, a small rise in price evokes an indefinitely large increase in the amount supplied. Further, a small drop in price would reduce the quantity, producers are willing to supply to zero.
(2) Perfectly Inelastic (Es=0):
Supply for a commodity is perfectly inelastic, if supply remains same irrespective of change in price of the commodity. A perfectly inelastic supply curve is a straight line parallel to the Y- axis as shown in Fig. 3.9. It is clear from the figure that in this case, supply will not increase at all how so ever much price may rise.
The producers dump the produced quantity of a commodity for whatever it would bring. Here, the price of the commodity depends upon the demand of the commodity. The higher the demand, the higher will be the price.
(3) Unit Elastic (Es =1):
Supply of a commodity is said to be unit elastic, if the percentage change in quantity supplied is equal to the percentage change in price. Any straight line supply curve passing through the origin has an elasticity of supply equal to unity (Fig. 3.10) irrespective of the slope of this straight line and the scales of the two axis. But, it is important to realise that unitary elasticity of supply unlike unitary elasticity of demand, has no special economic significance.
(4) More than Unit Elastic (E s> 1):
When the percentage change in quantity supplied exceeds the percentage change in price, supply of the commodity is said to be elastic or more than unit elastic (Fig. 3.11). This type of supply curve passes through the price (Y) axis.
(5) Less than Unit Elastic (Es < 1):
When the percentage change in quantity supplied is less than the percentage change in price, supply of the commodity is said to be inelastic or less than unit elastic (Fig. 3.12). This type of supply curve passes through the quantity (X) axis.