1.2.5 - Elasticity Of Supply

Question 1

What Is PES?

Answer 1

Measures the responsiveness of QS, given a change in price.

Question 2

How Do You Calculate PES?

Answer 2

%∆QS / %∆P

Question 3

When Will The PES Figure Be, Once Calculated?

Answer 3

Always positive, due to the law of supply.

Question 4

If The PES Value Is Greater Than 1, What Is It?

Answer 4

Supply is price elastic.

Question 5

What Is Meant When Supply Is Price Elastic?

Answer 5

For any price change, the change in QS will be proportionally greater.

Question 6

If The PES Value Is Less Than 1, What Is It?

Answer 6

Supply is price inelastic.

Question 7

What Is Meant When Supply Is Price Inelastic?

Answer 7

When the price changes, the change in QS will be proportionally less.

Question 8

If The PES Value Is 0, What Is It?

Answer 8

Supply is perfectly price inelastic.

Question 9

What Is Meant When Supply Is Perfectly Price Inelastic?

Answer 9

Regardless of the change in price, QS will never change.

Question 10

If The PES Value Is ∞, What Is It?

Answer 10

Supply is perfectly price elastic.

Question 11

What Is Meant When Supply Is Perfectly Price Elastic?

Answer 11

A change in price means that QS falls to 0.

Question 12

If The PES Value Is 1, What Is It?

Answer 12

Supply is unit price elastic.

Question 13

What Is Meant When Supply Is Unit Price Elastic?

Answer 13

QS changes by exactly the same percentage as price.

Question 14

What Is The Mnemonic Used For Factors That Influence PES?

Answer 14

PSSST.

Question 15

What Does PSSST Stand For?

Answer 15

Production lag.
Stocks.
Spare capacity.
Substitutability of FoPs.
Time.

Question 16

The Length Of The Production lag, Will Mean That PES Is What?
(2 Points)

Answer 16

~ Longer = Inelastic.

~ Short = Elastic.

Question 17

If There Is A Larger Level Of Stock, What Will The PES Be?
(2 Points)

Answer 17

~ Larger = Elastic.

~ Lower = Inelastic.

Question 18

If A Business Has More Spare Capacity, What Will The PES Be?
(2 Points)

Answer 18

~ More = Elastic.

~ Less = Inelastic

Question 19

If FOPS Are More Substitutable, What Will PES Be?
(2 Points)

Answer 19

~ More = Elastic.

~ Less = Inelastic.

Question 20

In The SR & LR, What Will The PES Be?
(2 Points)

Answer 20

~ SR = Inelastic.

~ LR = Elastic.