In Figure 4. For example, setting a price above market equilibrium will result in a reduction in quantity demanded and an increase in quantity supplied.
Other factors that can influence the market supply of a given product or service include technological advancements and changes in pricing for things such as inventory, raw materials and labor.
When pricing changes result in a difference between the quantity supplied and the quantity demanded, a surplus or shortage can exist. Key Concepts and Summary Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price.
The value of our elasticity will indicate how responsive a good is to a change in income. Any change in non-price factors would cause a shift in the supply curve, whereas changes in the price of the commodity can be traced along a fixed supply curve.
However, there are multiple other factors that affect markets on both a microeconomic and a macroeconomic level. Inelastic Table 1. These can be calculated with the following formulas: Own-Price Elasticity of Supply.
That tendency is known as the market mechanism, and the resulting balance between supply and demand is called a market equilibrium.
Calculating the Price Elasticity of Demand. The price elasticity of supply is calculated as the percentage change in quantity divided by the percentage change in price. The same applies when the price goes down. Supply and demand heavily guide market behaviorbut do not outright determine it.