1.2.5 - Elasticity Of Supply Flashcards
What Is PES?
Measures the responsiveness of QS, given a change in price.
How Do You Calculate PES?
%∆QS / %∆P
When Will The PES Figure Be, Once Calculated?
Always positive, due to the law of supply.
If The PES Value Is Greater Than 1, What Is It?
Supply is price elastic.
What Is Meant When Supply Is Price Elastic?
For any price change, the change in QS will be proportionally greater.
If The PES Value Is Less Than 1, What Is It?
Supply is price inelastic.
What Is Meant When Supply Is Price Inelastic?
When the price changes, the change in QS will be proportionally less.
If The PES Value Is 0, What Is It?
Supply is perfectly price inelastic.
What Is Meant When Supply Is Perfectly Price Inelastic?
Regardless of the change in price, QS will never change.
If The PES Value Is ∞, What Is It?
Supply is perfectly price elastic.
What Is Meant When Supply Is Perfectly Price Elastic?
A change in price means that QS falls to 0.
If The PES Value Is 1, What Is It?
Supply is unit price elastic.
What Is Meant When Supply Is Unit Price Elastic?
QS changes by exactly the same percentage as price.
What Is The Mnemonic Used For Factors That Influence PES?
PSSST.
What Does PSSST Stand For?
Production lag.
Stocks.
Spare capacity.
Substitutability of FoPs.
Time.
The Length Of The Production lag, Will Mean That PES Is What?
(2 Points)
~ Longer = Inelastic.
~ Short = Elastic.
If There Is A Larger Level Of Stock, What Will The PES Be?
(2 Points)
~ Larger = Elastic.
~ Lower = Inelastic.
If A Business Has More Spare Capacity, What Will The PES Be?
(2 Points)
~ More = Elastic.
~ Less = Inelastic
If FOPS Are More Substitutable, What Will PES Be?
(2 Points)
~ More = Elastic.
~ Less = Inelastic.
In The SR & LR, What Will The PES Be?
(2 Points)
~ SR = Inelastic.
~ LR = Elastic.
