Unit Elastic Supply:

The supply of a commodity is said to be unit elastic when the price elasticity of supply is exactly equal to 1. The percentage change in price causes the same percentage change in quantity supplied.

Example

A rise in the price of a product from 200,000 to 220,000 resulted in quantity supplied increasing from 300 to 330 units. Calculate the price elasticity of supply and interpret your results.

Solution

ΔP = ¢220,000 - ¢200,000 = ¢20,000

ΔQs = 330 - 300 = 30

PED = (ΔQs / ΔP) x (P/Qs)= (30/20,000) x (200,000/300) = 1

Since PES is equal to 1, supply of the product is unit elastic.