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Cross elasticity of supply is defined as the responsiveness of the supply of good A to a change in the price of good B. Using an example of a farmer who grows both potatoes and carrots the cross elasticity of supply of carrots against potatoes is how much supply of carrots will change if the price of potatoes changes.

Many may see carrots and potatoes as being substitutes for each other and therefore it would be a safe assumption that as the price of potatoes increases, the supply of carrots falls. This is because the farmer now uses more land to produce potatoes and less to produce carrots.

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Q: What is cross elasticity of supply?
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Cross elasticity in economics, also referred to as cross-price elasticity is used to measure the changes of the demand of a certain commodity to the price changes of another good.


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The point elasticity of supply is a measure of the rate of response of quantity demand due to a price change. The higher the elasticity, the more sensitive the sellers are to these changes.


What is the primary determinant of elasticity of supply?

A key determinant of the price elasticity pf supply is the availability of alternative products. The more choices consumers have, the more elasticity the price must have.


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