just like demand there's also a price elasticity of supply elasticity is a measure of responsiveness to price changes if we change the price how much will producers respond that's the price elasticity of supply it's calculated just the same way elasticity represented by the Greek letter Epsilon is equal to the percent change in the quantity supplied divided by the percent change in the price that triangle in there is the Greek letter Delta and it represents the word change if we start at a price of 30 and at that price producers make 40 units but then raise the price to 50 and see that this incentivized producers to increase production to 60 units we can calculate the elasticity of supply a percent change is calculated by taking a new value subtracting an old one and dividing the difference by the old value here in the numerator is the percent change in the quantity supplied we started at a quantity of 40 and ended at a quantity of 60. so the percent change is 60 minus 40 all divided by 40 which gives us 0.5 or 50 percent the percent change in the price is the new price 50 minus the old price 30 divided by the old price 30. that gives us 0.6 repeating or 66.7 percent 50 divided by 66.7 percent is 0.75 this means that if the price increases by one percent we expect producers to increase production by 0.75 percent as with demand we have three categories for the price elasticity of supply due to the law of supply the price elasticity of supply is always positive and so there's no need to take the absolute value like we did with demand when elasticity is greater than one we call it elastic a very elastic supply curve will look like this yellow supply curve if the price changes even a little the quantity supplied will change by a lot it's very responsive when the elasticity is equal to one we call it unit elastic this would just be a special case and unlike for demand we don't expect to see it very often when the price elasticity is less than one we call it inelastic the red supply curve would be very inelastic because even large changes in the price can barely budge the quantity supplied here's an example of why the price elasticity of supply matters in 2021 and 2022 many firms complained that they just weren't able to hire enough workers to run their businesses at Full Steam there was a lot of competition for workers and that led to an increase in wages in fact between March 2020 and March 2022 the wages for the lowest income earners increased by 20 percent despite paying more however firms continued to complain that they couldn't hire enough people that suggests that the supply of labor was inelastic if the supply of labor were elastic then an increase in the wages paid to workers would lead to a large increase in the number of workers willing to work but if the supply of labor is inelastic then an increase in wages might not increase the number of workers willing to work very much at all so what would make Supply more or less elastic just as it was with demand time is a major factor Supply becomes more elastic over time as people figure things out and find alternatives opportunity cost is another major factor in 2021 and 2022 lots of workers just had plenty of better options and so the opportunity costs of taking a wait staff job at a restaurant was too high what else do you think might influence the elasticity of supply