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Though the price of Tesla tends to rise, the production of Tesla doesn’t catch up quickly...

Though the price of Tesla tends to rise, the production of Tesla doesn’t catch up quickly enough. What then does this make the elasticity of supply of Tesla? Explain.

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Answer #1

Elasticity of supply means the ratio of change in quantity supplied to the change in price of good. If the change in quantity supplied will be more in relation to the change in price of good then the supply is said to be elastic supply. And the elasticity will be more than 1 in this case.

On the other hand, if the change in the quantity supply is less in relation to the change in price of good then supply is said to be inelastic and the elasticity will be less than 1 in this case.

As per question, price of Tesla increased but there is less increase in the change in the quantity supplied of Tesla. This means that elasticity will be less than 1 and supply is said to be inelastic.

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