1.2.5 Flashcards
What’s the definition of PES?
A numerical measure of the change in responsiveness of supply to a change in price.
Formula of PES
%CHNG of Price
What elasticity of supply does a good have when the PES is greater than one?
The elasticity of supply would be elastic.
What elasticity of supply does a good have when the PES is between 0 and 1?
The elasticity of supply would be inelastic.
What’s the formula for percentage change?
New - Old
————— X100
Old
Name 2 factors that affect PES
- Ease of holding stock
- Time period under production
- Length of the production process
What does being in the short-run mean?
Only the variable factors of production can be changed.
Raw materials and labour.
What does being in the long-run mean?
All factors of production can be changed.
Capital, enterprise, land and labour.
What elasticity of supply does a good have when the PES is ∞ ?
The elasticity of supply is perfectly elastic.
What elasticity of supply does a good have when the PES is 0?
The elasticity of supply is perfectly inelastic.
