2.3 Price Elasticity of Supply Flashcards
1
Q
What’s the definition of PES?
A
PES is a measurement of the responsiveness of quantity supplied to a change in price.
2
Q
What’s the formula for PES?
A
PES = %Change in QS / %Change in P
3
Q
What does it mean if the PES value is more than 1?
A
The supply is price elastic
4
Q
What does it mean if the PES value is less than one?
A
The supply is price inelastic
5
Q
What does it mean if the PES value is zero?
A
The supply is perfectly inelastic
6
Q
What does it mean if the PES value is infinity?
A
The supply is perfectly elastic
7
Q
What does it mean if the PES value is one?
A
The supply is unit elastic.
8
Q
What are the 4 main factors affecting price elasticity of supply?
A
- Scarcity of raw materials
- The length of time it takes to produce
- Stocks of components or good available
- How easily resources can be transported into the good
