Supply Elasticity

• • In economics elasticity is the measurement of how responsive one economic variable is to a change in another.
• • Price Elasticity of Supply describes the degree to which supply of a good changes in response to change in price of that good
• • PES = %$\Delta$QS/ %$\Delta$P
• • Supply is said to be elastic when a given percentage change in price causes a greater percentage change in supply.
  • Supply is said to be inelastic when a given percentage change in price causes a smaller percentage change in supply.
• • The Short-run is defined as the time period in which at least 1 of the FOPs is fixed and cannot be varied. This means that the only way a firm can produce more is by adding more variable FOPs.
• • In the Long-run a firm can vary all FOPs. Varying fixed FOPs does happen but only happens occasionally, while varying variable factors of FOPs is far more common.