Geometric measure of elasticity of supply
Topic: Theory of the Firm, Supply and Perfect Competition · NCERT: Class 12, Ch 4 "The Theory of the Firm under Perfect Competition"
Meaning
The geometric measure finds the price elasticity of supply at a point on a straight-line supply curve from the graph alone. At point S on the line: eS = Mq₀ / Oq₀ Here M is where the line, extended if needed, meets the quantity axis. q₀ is the quantity at S, and O is the origin. The result depends on where the line crosses an axis, not on how steep it is:
- If the line cuts the price axis, M falls in the negative quantity range, so eS > 1 at every point.
- If the line passes through the origin, M = O, so eS = 1 whatever its slope.
- If the line cuts the quantity axis, M falls in the positive quantity range, so eS < 1 at every point.
Example
Suppose a supply line meets the quantity axis at M = 5 units, and at point S the quantity is q₀ = 20. Then Mq₀ = 15 and Oq₀ = 20, so eS = 15/20 = 0.75, which is inelastic.
Don't confuse with
- Slope of the supply curve: a steep line and a flat line through the origin both have eS = 1. This is a classic exam trap.