1.2.5: Elasticities Of Supply

Question 1

What is the shorthand of price elasticities of supply?

Answer 1

PES.

Question 2

What are price elasticities of supply (PES)?

Answer 2

The responsiveness of supply to a change in the price of a good.

Question 3

What is the formulae of price elasticities of supply (PES)?

Answer 3

% change Q P1 change Q
—————- or — X ————-
% change P Q1 change P

Question 4

PES > 1 =

Answer 4

Elastic.

Question 5

PES = 1 =

Answer 5

Unitary elastic.

Question 6

PES < 1 =

Answer 6

Inelastic.

Question 7

What is elastic (PES)?

Answer 7

•Quantity supplied changes by a larger % than price.
•Supply is relatively responsive to price.

Question 8

What is unitary elastic (PES)?

Answer 8

•Quantity supplied changes by the same % as price.

Question 9

What is Inelastic (PES)?

Answer 9

•Quantity Supplied changes by a small % than the price.
•Supply is relatively unresponsive to price.

Question 10

What is an example of an inelastic graph?

Answer 10

Question 11

What is an example of an elastic graph?

Answer 11

Question 12

What are the factors that influence price elasticities of supply (PES)?

Answer 12

•Availability of substitutes: substitutes increase elasticity.
•Spare production capacity: businesses can increase output and supply will be elastic.
•Time: supply is more elastic when a firm has more time to adjust its production levels.