2.2.2 Price Elasticity of Supply (PES)

• What does Price Elasticity of Supply (PES) measure?

  Responsiveness of quantity supplied
• In the short run, producers have relatively inelastic PES due to limited ability to adjust production.


  True
• What type of PES do perishable goods have due to storage limitations?

  Inelastic
• Abundant resources and high production capacity lead to elastic supply.


  True
• Price Elasticity of Supply (PES) is calculated as the percentage change in quantity supplied divided by the percentage change in price
• Match the factor with its effect on PES:

  Time Period ↔️ Inelastic in short-run, elastic in long-run

  Availability of Resources ↔️ Inelastic with limited resources, elastic with abundant resources

  Ease of Storage ↔️ Inelastic for perishable goods, elastic for non-perishable goods
• In the long run, producers have relatively elastic PES because they can expand capacity and hire more resources.
• Why do non-perishable goods have elastic PES?

  They can be stored easily
• The short-run PES is relatively inelastic
• Match the ease of storage with the corresponding PES:

  Perishable goods ↔️ Inelastic supply

  Non-perishable goods ↔️ Elastic supply
• What does a PES value of less than 1 signify?

  Inelastic
• Steps to calculate PES using the percentage change method

  1️⃣ Determine initial price and initial quantity supplied

  2️⃣ Calculate the percentage change in quantity supplied

  3️⃣ Calculate the percentage change in price

  4️⃣ Divide the percentage change in quantity supplied by the percentage change in price
• What does a PES value greater than 1 indicate about the supply?

  Elastic
• Limited resources and capacity in the short run lead to inelastic supply.

  True
• Price Elasticity of Supply (PES) measures the responsiveness of the quantity supplied to a change in price
• PES is relatively inelastic in the short run because producers have limited ability to adjust production.

  True
• Limited resources and production capacity lead to inelastic supply.
• What does a PES value of 0 indicate?

  Perfectly Inelastic
• If PES equals 1, the supply is unit elastic, meaning quantity supplied changes by the same percentage as price.

  True
• A PES value of infinity indicates that supply is perfectly elastic.
• Steps to calculate PES using the percentage change method

  1️⃣ Determine initial and final prices and quantities supplied

  2️⃣ Calculate the percentage change in quantity supplied

  3️⃣ Calculate the percentage change in price

  4️⃣ Divide the percentage change in quantity supplied by the percentage change in price
• PES is categorized into three scenarios: elastic, inelastic, and unitary elastic.
• Elastic supply occurs when the quantity supplied changes by a larger percentage than the price.


  True
• What does the Price Elasticity of Supply (PES) measure?

  Responsiveness of quantity supplied to price changes
• Limited resources and production capacity lead to inelastic supply.


  True
• A PES value of 0 indicates a perfectly inelastic supply.
• A PES value of 1 means the quantity supplied changes by the same percentage as the price.

  True
• The PES formula is (Percentage change in quantity supplied) / (Percentage change in price).
• In the short run, producers have limited ability to adjust production.
• What is the formula for calculating PES?

  (% change in quantity supplied) / (% change in price)
• How is PES calculated?

  Percentage change in quantity supplied divided by percentage change in price
• Why is PES relatively elastic in the long run?

  Producers can adjust production capacity
• Why do perishable goods have inelastic supply?

  They cannot be stored easily
• A PES value less than 1 indicates that supply is inelastic.
• What does a PES value greater than 1 signify?

  Elastic supply
• What range does the PES value fall within?

  0 to infinity
• What is the PES if the quantity supplied increases by 20% and the price increases by 20%?

  1
• Match the PES scenario with its key characteristics:

  Elastic Supply ↔️ Producers can easily increase production

  Inelastic Supply ↔️ Resource scarcity

  Unitary Elastic Supply ↔️ Production costs proportional to output changes
• What type of PES occurs when quantity supplied changes by a smaller percentage than price?

  Inelastic supply
• Unitary elastic supply occurs when the PES value equals 1.