Elasticity of supply depends upon a number of factors some of which are as follows.
i. Nature of the product:
If a product is perishable, its supply is inelastic. It has to be sold whatever the price within a certain period. On the contrary, durable products have higher price elasticity of supply.
Such products can be conveniently stored till the market offers a fair price for them. Most agricultural products are inelastic in supply either due to their perishability or due to limited supply of land.
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ii. Nature of production costs:
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If costs decline with level of output, supply of such goods is highly elastic. On the contrary, if costs rise with output, supply is inelastic in nature.
iii. Nature of production technique:
If the technique of production is complex, the supply of products is inelastic. On the contrary, if the technique is simple and cheap, supply is highly elastic.
iv. Nature of production period:
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If the period of production is long, supply lags behind demand and is usually inelastic in nature. For instance, supply of wheat is inelastic until harvest time.
v. Future expectations:
If price is expected to go up in future, current supply becomes inelastic. Sellers hold back stocks with a view to coming out with them at the time when they expect the price to go up.
vi. Degree of shift ability of resource:
If resources possessed by producers can be shifted from current use to other uses, supply of other products can be increased when price of these products rises. Multi-product firms keep shifting their resources from production of one good to that of another on the basis of the price offered by the market. Thus, supply of some of the-products of a multi-product firm is usually highly elastic.