The more responsive the supply of apartments is to changes in price (rent in this case), the less rents rise when the demand for apartments increases We measure the price elasticity of supply (eS) as the ratio of the percentage change in quantity supplied of a good or service to the percentage change in its price, all other things unchanged: Equation 5.6 eS = % change in quantity supplied % change in price Because price and quantity supplied usually move in the same direction, the price elasticity of supply is usually positive The larger the price elasticity of supply, the more responsive the firms that supply the good or service are to a price change Supply is price elastic if the price elasticity of supply is greater than 1, unit price elastic if it is equal to 1, and price inelastic if it is less than A vertical supply curve, as shown in Panel (a) of Figure 5.11 "Supply Curves and Their Price Elasticities", is perfectly inelastic; its price elasticity of supply is zero The supply of Beatles’ songs is perfectly inelastic because the band no longer exists A horizontal supply curve, as shown in Panel (b) of Figure 5.11 "Supply Curves and Their Price Elasticities", is perfectly elastic; its price elasticity of supply is infinite It means that suppliers are willing to supply any amount at a certain price Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 269