Q10 of 38 Page 1

Explain the geometric method of measuring price elasticity of supply. Use diagram.

The geometric method of measuring price elasticity of supply states that – the elasticity of supply depends on the origin of the supply curve and can be computed with the help of the following formula –


For a positively sloped straight-line supply curve, any of the following three situations may exist:


(i) Es =1, when a straight line, positively sloped supply curve starts from the point of origin.


(ii) Es >1, when a straight line, positively sloped supply curve starts from Y -axis.


(iii) Es <1, when a straight line, positively sloped supply curve starts from X -axis.



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