Mnemonic Monday – Price elasticity of supply

This week’s mnemonic is for factors affecting price elasticity of supply

BRITS

Barriers to entry – e.g. Patents or high cost of advertising could make it hard for new firms to enter the market

Raw materials – If raw materials are readily available, it will be relatively easy to expand production

Inventory – Businesses with plenty of stock can increase supply easily.

Time – Many agricultural products take time to make so supply is fixed in the short term.

Spare Capacity – If businesses are not running to full capacity they are more able to increase supply. The supply of goods and services is often most elastic in a recession when there is plenty of spare labour and capital resources.