1.2.5 Elasticity of supply

• What is price elasticity of supply?


  Measures the responsiveness of supply to a change in price
• PES formula?


  % change in quantity supplied / % change in price
• PES numbers?


  Inelastic 0-1

  Elastic >1

  Unitary =1

  Perfectly inelastic =0

  Perfectly elastic =infinity
• Factors affecting PES? (how easy is it for a firm to respond to a change in price)


  Barriers to entry

  Raw materials

  Inventories

  Time

  Spare capacity