all right now let's switch gears and talk about the price elasticity of supply Just like with the demand this concept tells us how responsible sellers are to changes in price In other words when the price of good rise how much more a producer willing and able to supply when price fall how much do they cut back we measure price elasticity of supply using the same basic formula as we did for demanded elasticity Yeah it is percent change in quantity divided by percent change in price We can also apply with the point method to supply curve Bical supply curve represent perfectly inelastic supply with the zero price elasticity This now quantity supplied quantity supplied doesn't change no matter how much price change Horizontal supply curve represent a perfectly elastic supply with infinite price elasticity Sellers are incredibly sensitive to price Tiny price change will lead to huge change in quantity supplied In this case here we have inelastic supply with the elasticity less than one Supply cop is relatively steady Elastic supply with elasticity greater than one Supply cop is relatively flat We also have a special case elasticity is exactly one that is unit elastic supply Okay Then question is what determine price elasticity of supply if a producer can easily get the resource they need like raw materials labor or equipment they can ramp up production quickly when price rise That means supply is more elastic But if those input are hard to combine or take time to scale producers can respond as easily So supply is more inelastic Yeah Think of it this way Imagine you run factory The price of your product goes up Of course you want to produce more But can you can you quickly hire more workers get more materials if yes then your supply is in uh elastic But now think about land If price of land especially beachfront land price of land goes up you can't just create more land So supply of land is pretty much fixed very inelastic That's why the supply curve for land is steep While for something like cars which can be manufactured more easily supply cover is flatter The time horizon matter it's another big factor Just like demand supply becomes more elastic in the long run than in the short run Why because it takes time for producer to make a big changes You can build a factory overnight but over a few years sure So in the short run producers are kind of stuck with what they have But in the long run they can invest to expand and adapt That's why supply curves flatten out over time Long run supply is more elastic Same goes for demand right so both supply and demand tend to be more elastic the more time people and producer have to adjust Yeah here is interesting real world case I want to think about Let's go back to 2008 financial crisis During the time demand drop for pretty much everything houses cars you name it Prices fell across the board but especially house prices crashed while car prices did down but didn't totally collapse So what could explain the difference yeah it comes down to supply elasticity Supply of houses much more inelastic than supply of car Yeah think about it If you are home builder you can't just unbuild a house or take it off market easily Houses are big Fix the asset Supply doesn't adjust quickly But if you are car manufacturer you can show slow down production shut down factory temporarily or delay new model That's why the supply of car more elastic it can respond more easily to change in demand So when demand dropped in 2008 supply of house couldn't budge much which meant price had to take bigger hit with a steep supply curve In contrast car had a flat supply curve So price didn't have to fall as far to adjust to the lower demand