Measurement of elasticity of supply

There are two methods to measure elasticity of supply. They are
• Point elasticity
• Arc elasticity

Point elasticity

Under the point method of measuring elasticity, we study the changes in quantity supplied at a particular point using the below formula.

Point elasticity = p / q x q / p

Where,
p = Price
q = Quantity
p = Change in price
q = Change in quantity

Example
 Quantity (units) Price (₹) 50 10 75 15
Solution
p = ₹ 10

q = 50

∆p = (15-10) = ₹ 5

∆q = (75-50) = 25

Using the following formula,

= p / q x ∆q / ∆p

We get,

= 10 / 50 x 25 / 5

= 1

Arc elasticity

In order to measure the elasticity of supply between price changes more accurately, we use the following formula.

q / p x (p1 + p2) / (q1 + q2)

Where,
p = change in price and,
q= change in quantity
p1 = original price
p2 = new price
q1 = original quantity
q2 = new quantity

Example
 Quantity (units) Price (₹) 250 100 280 120
Solution
= ∆q / ∆p x (p1 + p2) / (q1 + q2)
We get
= 30 / 20 x (100 + 120) / (250 + 280)
= 0.6  