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Discuss whether the elasticity of supply of manufactured goods is likely to be greater than the elasticity of supply of agricultural goods [12]

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Introduction

Transfer-Encoding: chunked ´╗┐Discuss whether the elasticity of supply of manufactured goods is likely to be greater than the elasticity of supply of agricultural goods [12] The term elasticity of supply measures the responsiveness of the quantity supplied by producers of a given product in relation to a change in the price of the product. The elasticity of supply is affected by factors such as the production time, the availability of the factors of production needed, the perishability of the product, and in turn, its ability to be stocked, the transportation technology and infrastructure and various other factors. In a more general sense, the easier it is for a producer to change the level of output supplied, the higher the price elasticity of supply. Certain aspects of agricultural goods are very likely to increase their price elasticity of supply. One of these aspects is the fact that many agricultural goods such as grains can be stored for very long periods of time allowing for large stocks to be built up in order to easily increase supply in the case where the price of such a product increases. ...read more.

Middle

Moreover, the supply of certain factors of production is also fixed. There is only so much fertile farmland available, thus the extent to which supply can be increased is limited by the land available. The real life effects of such issues can be seen in multiple examples, perhaps most notably in Japan, where, due to the nation?s very mountainous geography, domestic farmers are unable to increase production despite increases in the price of agricultural goods. As such, despite the price elasticity of supply for agricultural goods going up in recent years, it is still relatively low due to the nature of the production process as an inherently time consuming one. In a general sense, the price elasticity of supply for manufactured goods tends to be relatively high. One potential reason for this is the fact that the vast majority of manufactured goods tend to be fairly durable meaning that they can easily be stocked up which allows firms to use these stocks to meet an increase in price, thus raising their price elasticity of supply. ...read more.

Conclusion

Similarly the production of manufactured goods which require raw materials in fixed supply or which need to be transported over long distances, such as jewellery, will also tend to have a very low price elasticity of supply because regardless of changes in price, the producer?s ability to change output will be held back by the availability of the raw materials and the transportation time. Overall, while at a general level, the price elasticity of supply for agricultural goods will usually be lower than for manufactured goods, the likelihood can only be accurately assessed with more information about the production process of the manufactured and agricultural goods. However, if the production of manufactured goods is done with the use of abundant resources, factors of production with high occupational mobility and within a relatively short space of time, the price elasticity of manufactured goods is very likely to be much higher than the price elasticity of supply for most agricultural goods. ...read more.

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