2.6 Price Elasticity of Supply

• Price Elasticity of Supply (PES)


  Measure of quantity supplied of a good to change in price
• PES > 1


  Elastic
• PES < 1


  Inelastic
• Determinants of PES

  • Rate of cost increases
  • Time period considered
  • Ability to store stocks
  • Mobility of FoPs
• Rate of cost increases


  • How much do costs rise as output is increased
  • If factory is full - new factory, inelastic
  • If spare capacity, elastic
• Time period considered


  • In short run, supply tends to be inelastic
  • In long run, supply tends to be elastic
  • Short production time - elastic
  • Long production time - inelastic
• Ability to store stocks

  • For durable goods, stockpiles can be used - elastic
  • For non-durable goods, stockpiles can't be used - inelastic
• Mobility of FoPs

  • Substitutable factors of production (can be substituted) - elastic
  • Non-suitable factors of production (specialised) - inelastic