1.2.5 Elasticity of supply Flashcards
1
Q
What is PES
A
responsiveness of quantity supplied in relation to a change in the price of the good.
price elastic = increase in price = EVEN MORE increase in supply
price inelastic = supply is not responsive to a change in price.
2
Q
Influences on price elasticity of supply?
A
- Resources/factors of production are flexible and mobile.
- How easy it is to produce/store
- Time
- Stockpiling
- Working below full capacity (will be able to easily respond to increase in price by producing more)
- Ease of entry into market.
3
Q
What is price elastic
A
When PES > 1 - qty supplied changes by a larger % than price so supply is relatively responsive to price.
4
Q
What is price inelastic?
A
When PES < 1 - qty supplied changes by a smaller % than price so supply is relatively unresponsive to price.
