Figure 5.11 Supply Curves and Their Price Elasticities The supply curve in Panel (a) is perfectly inelastic In Panel (b), the supply curve is perfectly elastic Time: An Important Determinant of the Elasticity of Supply Time plays a very important role in the determination of the price elasticity of supply Look again at the effect of rent increases on the supply of apartments Suppose apartment rents in a city rise If we are looking at a supply curve of apartments over a period of a few months, the rent increase is likely to induce apartment owners to rent out a relatively small number of additional apartments With the higher rents, apartment owners may be more vigorous in reducing their vacancy rates, and, indeed, with more people looking for apartments to rent, this should be fairly easy to accomplish Attics and basements are easy to renovate and rent out as additional units In a short period of time, however, the supply response is likely to be fairly modest, implying that the price elasticity of supply is fairly low A supply curve corresponding to a short period of time would Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 270