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Elasticity of Supply - 30 |
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- the level of unutilised capacity.
An incecream maker, in Spring, has unutilised capacity in their factory. They have several icecream making machines, but are only using one of them. If warm weather is forecast for next week, the ice cream manufacturer can rapidly increase production from Qo to Q1, with only a small increase in total production costs. The cost of icecream will rise only marginally from Po to P1.