2.6 Elasticity of supply

• Price elasticity of supply (PES) is a measure of how much the quantity supplied of a good changes when there is a change in its own price.
• PES = % change in quantity supplied / % change in price
• Price elastic supply:

  PES > 1
• Price inelastic supply:

  0 < PES < 1
• Unitary elastic supply:

  PES = 1
• Perfectly inelastic supply:

  PES = 0
• Perfectly elastic supply:

  PES = ∞
• Determinants of PES:

  • time
  • mobility of factors of production
  • unused capacity
  • ability to store
  • rate at which costs increase