Price elasticity of supply

• What is the abreviated form of price elasticty of supply?

  PES
• What is the price elasticity of supply?

  A measure of the responsiveness of quantity supplied for a product to change in its price
• What is the formula for price elasticity of supply?

  Percentage change in quantity supplied/percentage change in price
• What value does the price elasticty of supply have and why?

  It will always have a positive value because price and quantity move in the same direction as the supply curve is upward sloping
• What is price elastic supply?

  When a change in price has led to a larger percentage in quantity supplied
• What is the value of PES in price elastic supply?

  The value of PES will be more than 1, and the supply curve will be almost horizontal
• What is price inelastic supply?

  When a change in price has led to a smaller percentage change in quantity supplied
• What is the value of PES in price inelastic supply?

  The value of PES will be between 0 and 1, and the supply curve will be almost vertical
• What is unitary elastic supply?

  When a change in price has led to the same percentage change in quantity supplied
• What is the value of PES unitary elastic supply?

  The value of PES will be 1, and the supply curve will be a straight line through the origin
• What is perfectly elastic supply?

  When a small decrease in price has led to the quantity supplied to fall to 0
• What is the value of PES in perfectly elastic supply?

  The value of PES will be infinity, and the supply curve will be horizontal
• What is perfectly inelastic supply?

  When a change in price doesn't affect quantity supplied
• What is the value of PES in perfectly inelastic supply?

  The value of PES will be 0, and the demand curve will be vertical
• How does time affect the price elasticity of supply?

  It is often diffcult to change supply quickly in response to a price change, making it inelastic in the short run, but elastic in the long run
• How do stocks affect the price elasticity of supply?

  If stocks are available, then supply will be relatively elastic because manufacturers will be able to respond quickly to a price change
• How does spare capacity affect the price elasticity of supply?

  If a firm has underutilised machinery and unemployed workers, then supply is likely to be elastic
• How does the availability and cost of resources affect the price elasticity of supply?

  If resources are expensive, then supply will be relatively inelastic