PES

• What is the term used to describe the measure of responsiveness of quantity supplied to a change in price?

  Price elasticity of supply
• What does price elasticity of supply measure?

  It measures the responsiveness of quantity supplied to a change in the price of the good/service

  
• How is price elasticity of supply calculated?

  Price elasticity of supply is calculated as % change in quantity supplied divided by % change in price
• What does a price elasticity of supply (PES) greater than 1 indicate?

  PES > 1 indicates that supply is elastic
• What does a price elasticity of supply (PES) less than 1 indicate?

  PES < 1 indicates that supply is inelastic

  
• What does a price elasticity of supply (PES) of 0 signify?

  PES = 0 signifies perfectly inelastic supply
• What does a price elasticity of supply (PES) of infinity signify?

  PES = Infinity signifies perfectly elastic supply
• What does a PES of +3 indicate?

  A PES of +3 indicates elastic supply
• What does a PES of +1.2 indicate?

  A PES of +1.2 indicates elastic supply
• What does a PES of -2 indicate?

  A PES of -2 indicates price elasticity of demand (PED)
• What does a PES of +0.7 indicate?

  A PES of +0.7 indicates inelastic supply
• What does a PES of +2.3 imply about the relationship between price and quantity supplied?

  A PES of +2.3 implies that a change in price leads to a greater than proportionate change in quantity supplied
• What does a PES of +0.3 imply about the relationship between price and quantity supplied?

  A PES of +0.3 implies that a change in price leads to a less than proportionate change in quantity supplied
• What is a key characteristic of price elasticity of supply?

  Price elasticity of supply is always positive
• What does a PES greater than one indicate about firms' responses to price changes?

  A PES greater than one means firms can quickly respond to changes in price
• What are the time periods of production in relation to price elasticity of supply?

  They include momentary, short run, and long run

  
• What is the momentary time period in production?

  • The time period in which firms cannot increase supply
  • All factors of production are fixed
• What characterizes the short run in production?

  • Time period in which at least one factor of production is fixed
  • Usually, capital is the fixed factor
• What characterizes the long run in production?

  • Time period in which all factors of production are variable
  • Technology remains constant