How responsive is the quantity producers offer to a change in price, and what makes supply more or less elastic?
Topic 2.4 Price Elasticity of Supply: calculate price elasticity of supply using the midpoint formula, classify supply as elastic, inelastic, or unit elastic, and explain why time is the key determinant.
A focused answer to AP Microeconomics Topic 2.4, covering the price elasticity of supply, the midpoint formula, elastic versus inelastic versus unit elastic supply, the perfectly elastic and inelastic extremes, and why time is the chief determinant, with worked exam-style questions.
Reviewed by: AI editorial process; not yet individually human-reviewed
Have a quick question? Jump to the Q&A page
Jump to a section
What this topic is asking
Topic 2.4 measures how responsive quantity supplied is to a price change. The College Board wants you to calculate the price elasticity of supply with the midpoint formula, classify supply as elastic, inelastic, or unit elastic, recognize the perfectly elastic and perfectly inelastic extremes, and explain why time is the key determinant. The mechanics mirror the price elasticity of demand, but the determinants differ.
Calculating the price elasticity of supply
The result is positive because price and quantity supplied move in the same direction, so no absolute value is needed (unlike demand).
Classifying supply
A vertical (perfectly inelastic) supply curve fits a good with a fixed stock that cannot be reproduced, such as seats in a stadium on game day or an original painting. A horizontal (perfectly elastic) supply curve fits a constant-cost industry that can supply any quantity at a given price.
Time is the key determinant
Unlike demand, supply elasticity is dominated by one factor: the time horizon.
Other determinants reinforce this:
- Spare (excess) capacity: a firm with idle capacity can raise output cheaply, making supply more elastic.
- Ease of storing the good: a storable good lets producers respond to price changes by drawing on or building inventory, raising elasticity; a perishable good is more inelastic.
- Mobility of inputs: if inputs can be shifted into the industry easily, supply is more elastic.
This is why the same good can be inelastic in supply today and elastic over a year: the longer the period, the more producers can do.
Try this
Q1. A 20 percent rise in price causes a 5 percent rise in quantity supplied. Calculate the elasticity and classify the supply. [2 points]
- Cue. , which is less than 1, so supply is inelastic.
Q2. Explain why a perfectly inelastic supply curve is vertical. [1 point]
- Cue. Quantity supplied does not change at all when price changes, so the curve is a vertical line at the fixed quantity.
Exam-style practice questions
Practice questions written in the style of College Board exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
AP 2019 (style)1 marksMultiple choice. The price elasticity of supply tends to be greater (more elastic) when (A) producers cannot easily change output. (B) more time is available to adjust production. (C) the good is perishable. (D) inputs are highly specialized. (E) the firm is at full capacity.Show worked answer β
The answer is (B). Supply is more elastic when producers have more time to adjust output, because they can hire, build capacity, and reallocate resources. Time is the chief determinant of supply elasticity.
(A), (C), (D), and (E) all describe situations where producers cannot easily expand output, making supply more inelastic.
AP 2022 (style)4 marksFree response. When the price of a good rises from 7, quantity supplied rises from 80 to 120 units. (a) Using the midpoint formula, calculate the price elasticity of supply. (b) Classify supply as elastic, inelastic, or unit elastic. (c) Describe the supply curve that is perfectly inelastic. (d) Explain why supply is usually more elastic in the long run than in the short run.Show worked answer β
A four-point elasticity FRQ.
(a) (1 point): percentage change in quantity = (120 - 80) / ((120 + 80)/2) = 40/100 = 40 percent; percentage change in price = (7 - 5) / ((7 + 5)/2) = 2/6 = 33.3 percent; elasticity = 40 / 33.3 = 1.2.
(b) (1 point): an elasticity of 1.2 is greater than 1, so supply is elastic.
(c) (1 point): a perfectly inelastic supply curve is vertical; quantity supplied does not change at all when price changes (elasticity 0), as with a fixed stock of a unique good.
(d) (1 point): in the long run all inputs are variable, so producers can build capacity, enter the market, and reallocate resources; in the short run at least one input is fixed, limiting how much output can expand, so supply is less elastic.
Related dot points
- Topic 2.2 Supply: state the law of supply, distinguish a change in quantity supplied from a change in supply, and identify the determinants that shift the supply curve.
A focused answer to AP Microeconomics Topic 2.2, covering the law of supply, the difference between a movement along and a shift of the supply curve, the determinants of supply, and why the curve slopes upward, with worked exam-style questions.
- Topic 2.3 Price Elasticity of Demand: calculate price elasticity of demand using the midpoint formula, classify demand as elastic, inelastic, or unit elastic, apply the total revenue test, and identify the determinants of elasticity.
A focused answer to AP Microeconomics Topic 2.3, covering the price elasticity of demand, the midpoint formula, elastic versus inelastic versus unit elastic demand, the total revenue test, perfectly elastic and inelastic cases, and the determinants of elasticity, with worked exam-style questions.
- Topic 2.5 Other Elasticities: calculate and interpret the income elasticity of demand (normal versus inferior goods) and the cross-price elasticity of demand (substitutes versus complements).
A focused answer to AP Microeconomics Topic 2.5, covering income elasticity of demand and the normal-versus-inferior distinction, cross-price elasticity of demand and the substitute-versus-complement distinction, and how the sign and size of each elasticity are interpreted, with worked exam-style questions.
- Topic 2.6 Market Equilibrium and Consumer and Producer Surplus: find equilibrium price and quantity, identify consumer and producer surplus on a graph, and explain why the competitive equilibrium maximizes total surplus (allocative efficiency).
A focused answer to AP Microeconomics Topic 2.6, covering how supply and demand determine equilibrium price and quantity, the measurement of consumer and producer surplus, total surplus, and why the competitive equilibrium is allocatively efficient, with worked exam-style questions.
- Topic 3.3 Long-Run Production Costs: explain the long-run average total cost curve as an envelope of short-run curves, and identify economies of scale, diseconomies of scale, and constant returns to scale.
A focused answer to AP Microeconomics Topic 3.3, covering the long run when all inputs are variable, the long-run average total cost curve as an envelope of short-run curves, economies and diseconomies of scale, constant returns to scale, and minimum efficient scale, with worked exam-style questions.
Sources & how we know this
- AP Microeconomics Course and Exam Description β College Board (2023)