Elasticity works on the sellers' side too. The calculation is the midpoint method from Price Elasticity of Demand, applied to the supply curve from The Law of Supply.
Key idea
The price elasticity of supply is $$E_s = \frac{\%\Delta Q_s}{\%\Delta P},$$ a positive number because quantity supplied rises with price. Supply is more elastic when firms have more time, spare capacity, inputs that are easy to get, or goods they can store. Perfectly inelastic supply is a vertical line ($E_s = 0$); perfectly elastic supply is horizontal.
Why it works
Supply elasticity measures how easily sellers can make more when the price rises. A bakery with idle ovens can bake more by tomorrow; a vineyard can't grow more grapes until it plants vines and waits years. That's why supply is usually more elastic in the long run than in the short run. At the extreme, the number of seats in a stadium on game night can't change at all, whatever the price: the supply curve is vertical.
Worked example: A midpoint calculation
When the price of strawberries rises from \$3 to \$5 a box, farms offer 140 boxes instead of 100. Find the price elasticity of supply.
- $\%\Delta Q_s = \dfrac{140 - 100}{120} = \dfrac{1}{3} \approx 33.3\%$.
- $\%\Delta P = \dfrac{5 - 3}{4} = 50\%$.
- $E_s = \dfrac{33.3\%}{50\%} \approx 0.67$: inelastic.
Answer: About 0.67, inelastic.
Worked example: Short run and long run
A sudden rise in the demand for electricians raises their pay. Why does the quantity of electrician hours supplied respond little this month but much more over five years?
- This month, the only extra hours come from overtime by people already trained.
- Over five years, new people can train and get licensed, so many more hours become available.
- Supply is more elastic with more time to adjust.
Answer: More time to train makes supply more elastic.
Common mistake
Giving supply elasticity a minus sign out of habit from demand, or thinking perfectly inelastic supply is horizontal. Price and quantity supplied move the same way, so $E_s$ is positive. "Inelastic" means quantity doesn't respond to price: whatever the price, the quantity is the same, which is a vertical line. Check: picture the price rising. If the quantity can't move, the curve must go straight up.