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Elasticity of supply |
Also found in: Wikipedia, Hutchinson | 0.01 sec. |
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Elasticity of supply The degree of producers' responsiveness to price changes. Elasticity is measured as the percent change in quantity divided by the percent change in price. A large value (greater than 1) of elasticity indicates sensitivity of supply to price, e.g., luxury goods, where a rise in price causes an increase in supply. Goods with a small value of elasticity (less than 1) have a supply that is insensitive to price, e.g., food, where a rise in price has little or no effect on the amount that producers supply. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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| Differentiating, manipulating the resulting expression, and equating same to MRP (in order to satisfy the necessary condition for maximum profit), we obtain an expression that implies the firm's optimal wage is equal to the MRP of its optimal amount of labor multiplied by an expression equal to: the wage elasticity of supply at its optimal amount of labor divided by that elasticity plus 1. |
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