Demand Curves Based on Their Elasticity
The appearance of the supply curve reflects the price elasticity of supply. When the supply curve is vertical, supply is perfectly inelastic. When the supply curve is horizontal, supply is perfectly elastic. When the supply curve is inelastic, it tends to have a steeper slope or be more inclined. Conversely, when the supply curve is elastic, it tends to have a gentler slope or be flatter. Let’s examine each of these examples.
Perfectly Inelastic Supply Curve
As observed in the graph, the perfectly inelastic supply curve is vertical because, in response to a change in price, the quantity supplied does not change. Notice that when the price increases from 40 to 60, the quantity supplied remains at 500. Therefore, in this extreme case, the elasticity of supply is 0, and the quantity supplied remains the same regardless of the price.
Inelastic Supply Curve
When the supply curve is inelastic, the response of the quantity supplied to changes in price is proportionally smaller. In the graph, when the price increases from 40 to 70, the quantity rises from 400 to 600. Therefore, the increase in the quantity supplied is proportionally less than the increase in price.