COMMERCE 1AA3 Lecture Notes - Lecture 8: Hot Dog, Substitute Good
Document Summary
Types of supply: perfectly inelastic supply. Supplier will not change amount that they are supplier regardless of price. Examples: rare art; regardless of the price you can"t just make another priceless painting: inelastic supply. Requires hard to find resources, a lot of capital, and skilled labour. Doesn"t require: a lot of land, hard to find resources, and labour. Example: hot dog vendor: perfectly elastic supply. Examples: any good for which a decrease in selling price means a firm will not supply any amount. This would be the case if the price fell to a point where all suppliers would lose money if they produced goods: unit elastic supply. No goods out there that refer back to unit elastic supply: determinants of es. The key determinant of es is time. Supply is usually more elastic in the long run that in the short run. Example: the supply of roses is given by qs = p+30.