1.2.5. elasiticity of supply

• What is price elasticity of supply (PES)?

  PES measures the responsiveness of supply to a change in the price of the good.
• What is the formula for calculating price elasticity of supply?

  PES = % change in quantity supplied / % change in price.
• What is unitary elastic PES?

  Unitary elastic PES occurs when PES = 1, meaning quantity supplied changes by the same percentage as price.
• What characterizes relatively elastic PES?

  Relatively elastic PES occurs when PES > 1, indicating quantity supplied changes by a larger percentage than price.
• What characterizes relatively inelastic PES?

  Relatively inelastic PES occurs when PES < 1, indicating quantity supplied changes by a smaller percentage than price.
• What is perfectly elastic PES?

  Perfectly elastic PES occurs when PES = infinity, meaning any price change results in quantity supplied falling to 0.
• What is perfectly inelastic PES?

  Perfectly inelastic PES occurs when PES = 0, meaning a change in price has no effect on output.
• How does time affect price elasticity of supply?

  In the short term, supply is perfectly inelastic; in the long term, supply becomes more elastic as all factors are variable.
• How do stocks affect price elasticity of supply?

  If a business has stockpiles of goods, they can respond to price increases by using their stock, making supply more elastic.
• How does working below full capacity affect supply elasticity?

  Working below full capacity allows a business to respond to price increases by producing more, making supply more elastic.
• How does the availability of factors of production affect supply elasticity?

  Limited availability of skilled labor can make supply inelastic, as it takes time to increase the workforce.
• How does ease of entry into the market affect supply elasticity?

  High start-up costs can make it difficult to increase supply, resulting in inelastic supply.
• How does the availability of substitutes affect supply elasticity?

  High availability of substitutes increases elasticity, as producers can easily switch between goods in response to price changes.