What is Price Elasticity of Supply?

• A positive value indicates that an increase in price leads to an increase in quantity supplied, while a negative value indicates that an increase in price leads to a decrease in quantity supplied.
• What is Price Elasticity of Supply?:

  • Price elasticity of supply (PES) measures the responsiveness of quantity supplied to changes in price.
• % change in quantity Supplied /​

  % change in price​ = PES
• The formula for calculating PES is % change in Quantity Supplied / ​% change in price​.
• • Price elasticity of supply is inelastic if the value lies between 0 and +1 (a large percentage change in price leads to a smaller percentage change in quantity supplied). ​
• Price elasticity of supply is elastic if the value is above +1 (a small percentage change in price leads to a larger percentage change in quantity supplied).