PES

• What is PES?

  price elasticity of supply

  a measure of the responsiveness of Quantity Supplied to a change in price
• what is the formula of PES?

  PES = (%change in QS) / (%change in P)
• what is the figure for perfectly inelastic PES?

  0
• what is the range for relatively inelastic PES?

  0>1
• what is the figure for unitary elastic PES?

  1
• what is the range for relatively elastic PES?

  1 > infinity
• what is the figure for perfect elasticity?

  Infinity
• if a product is PES elastic, what is the explanation?

  If something is price elastic then producers are very responsive to price changes. a change in price leads to a more than proportionate change in quantity supplied.
• if a product is PES inelastic, what is the explaination?

  if an item is price inelastic the producers are not very responsive to price changes. a change in price leads to a less than proportionate change in quantity supplied
• if a product has unitary PES, what is the explanation?

  If an item has unitary elasticity then a change in price leads to the same % change in quantity supplied. a change in price leads to a proportionate change in supply
• what are the factors of PES?

  Spare capacity

  Time period

  Availability of Stock

  Range of products

  (STAR)
• what does Spare capacity mean?

  if a business lacks spare capacity producers are less able to increase the quantity supplied where there is an increase in price. therefore, PES is likely to be inelastic
• what does Time period mean?

  if it takes a long time to produce a product then it is more difficult to increase supply when there is an increase in price. therefore, making it more price inelastic
• what does availability of stock mean?

  if lacking in stock of the final consumer good (if there are none left in storage) then its difficult to increase supply when prices increase
• what does Range of Products mean?

  if a producer has a range of product that they sell, then when the price of one good increases they are able to increase supply by switching factors of production away from other goods