Economics, 3rd Edition

20%

10%

= 2

In this example, the elasticity of 2 reflects the fact that the quantity supplied moves proportionately twice 

as much as the price.

Point Elasticity of Supply Method

As with point elasticity of demand, point elasticity of supply measures elasticity at a particular point on 

the supply curve. Exactly the same principles apply as with point elasticity of demand so the formula for 

point elasticity of supply is given by:

Price elasticity of supply

=

%

ΔQs

%

ΔP

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86  PART 2  SUPPLY AND DEMAND: HOW MARKETS WORK

Let us look at an example:

Given the supply function, Qs

= −2 + 5p, if price changes by 1, quantity supplied will change by 5.

The ratio, 

ΔQs

ΔP

 (the reciprocal of the slope, remember) in this case will be 

5

1

= 5.

Using calculus we get the following formula: