price elasticity of supply

• What happens to quantity supplied when the price of a good changes?

  Quantity supplied changes as price changes
• What are the axes labeled in a supply diagram?

  Price on the y-axis, quantity on the x-axis
• What occurs when price increases from point p to p1?

  Quantity supplied increases from q to q1
• How do price and quantity supplied move in relation to each other?

  They move in the same direction
• What is the characteristic that determines supply change extent?

  Price elasticity of supply
• What does price elasticity of supply (PES) measure?

  Responsiveness of supply to price changes
• What is the formula for calculating PES?

  PES = % change in quantity supplied / % change in price
• If the percentage increase in price is 50% and quantity supplied is 150%, what is PES?

  PES is 3
• Why do we use percentages in PES calculations?

  To measure proportional changes in supply
• What is the new price if a phone's price falls from 200 pounds to 100 pounds?

  100 pounds
• If quantity supplied decreases from 50 to 10, what is the percentage change in quantity supplied?

  -80%
• What is the percentage change in price when it falls from 200 pounds to 100 pounds?

  -50%
• What happens to the negative signs in PES calculation?

  They cancel out, resulting in a positive number
• What is the final PES value when quantity change is -80% and price change is -50%?

  PES is 1.6
• What is the significance of price elasticity of supply (PES)?

  • Measures responsiveness of supply to price changes
  • Helps firms understand market dynamics
  • Affects production decisions and pricing strategies
• What are the steps to calculate PES using raw numbers?

  1. Calculate percentage change in quantity supplied
  2. Calculate percentage change in price
  3. Apply PES formula: PES = % change in quantity / % change in price