pes

• What does PES measure in economics?

  Responsiveness of quantity supplied
• The equation for PES is the percentage change in quantity supplied divided by the percentage change in price
• When converting numbers to percentage change, the equation is the difference between two numbers divided by the original number and multiplied by 100.
• Why is PES always a positive number?

  Law of supply
• When interpreting PES, if the number is greater than 1, supply is price elastic
• What does it mean if PES equals 0?

  Perfectly price inelastic
• A PES value of infinity indicates perfectly price elastic supply.
• What is the percentage change in price if it increases from £40 to £60?

  50%
• A 20% increase in quantity supplied with a 50% increase in price results in a PES value of 0.4
• What does a PES value of 0.4 indicate about supply?

  Price inelastic
• Order the following PES values from most to least price elastic:

  1️⃣ Infinity

  2️⃣ 2

  3️⃣ 1

  4️⃣ 0.5

  5️⃣ 0
• A steep supply curve indicates price inelastic supply.
• What type of supply curve is perfectly price elastic?

  Horizontal
• A long production lag for a good makes its supply more price inelastic
• The more substitutable factors of production are, the more price elastic supply becomes.
• In the short run, why is supply usually price inelastic?

  Fixed factors of production
• In the long run, all factors of production are variable
• Spare capacity in a business makes supply more price elastic.
• What is the phrase used to remember the determinants of PES?

  Three Ss in Coke