1.2|4 Price Elasticity of Supply (PES)

Question 1

What is the Price Elasticity of Supply (PES) ?

Answer 1

Measures the responsiveness of Qs to changes in P

Question 2

What is the formula for PES ?

Answer 2

% change Qs / % change P

Question 3

What is “The Short Run” ?

Answer 3

A time period where at least one factor of production remains fixed

Question 4

What is “The Long Run” ?

Answer 4

A time period where all factors of production can be varied (none are fixed).

Question 5

What will the PES value always be ?

Answer 5

Always Positive

Question 6

What is Price Inelastic Supply ?

Answer 6

A less than proportionate response in quantity supplied to a change in price.

Question 7

What is the PES value when a good has Price Inelastic Supply ?

Answer 7

Between 0 and 1

Question 8

What is the PES value when a good has Price Elastic Supply ?

Answer 8

Above 1

Question 9

What is Price Elastic Supply ?

Answer 9

A more than proportionate response in quantity supplied to a change in price.

Question 10

What are the factors that affect PES ?

Answer 10

1. Ease of entry into an Industry
2. Levels of Spare Capacity
3. Levels of stocks
4. Perishability
5. Time Period