2 Define and calculate the elasticity of supply. The short-run supply curve slopes upward because producers can take actions quite quickly to change the quantity supplied in response to a price change. For example, if the price of oranges falls, growers can stop picking and leave oranges to rot on the trees. Or if the price rises, they can use more fertiliser and improved irrigation to increase the yields of their existing trees.

In the long run, they can plant more trees and increase the quantity supplied even more in response to a given price rise.

The long-run supply curve shows the response of the quantity supplied to a change in price after all the technologically possible ways of adjusting supply have been exploited. In the case of oranges, the long run is the time it takes new plantings to grow to full maturity – about 15 years. In some cases, the long-run adjustment occurs only after a completely new production plant has been built and workers have been trained to operate it –

typically a process that might take several years.