1.2.5 Flashcards
1
Q
Price elasticity of supply
A
The responsiveness of a change in supply to a change in price
PES= %change in QS/ %change in price
2
Q
Elastic supply
A
Firms can increase supply at little cost
PES>1
3
Q
Inelastic supply
A
Increase in supply will be expensive for firms and take along time
PES<1
4
Q
Perfectly inelastic supply
A
PES=0
Supply is fixed so if there is a change in demand, it cannot be met easily
5
Q
Perfectly elastic supply
A
PES=infinity
Any quantity demanded can be met without changing price
6
Q
Factors influencing PES
A
TSLHB
1) Time scale
2) spare capacity
3) Level of stocks
4) How substitutable factors are
5) barriers to entry to the market
