2.4 Price elasticity of supply Flashcards
1
Q
What is price elasticity of supply?
A
Measures the extent to which the supply of a good in response to the change in the price of that good
2
Q
What does a PES of 0 mean?
A
Perfectly inelastic
3
Q
What does a PES of 0-1 mean?
A
Inelastic
4
Q
What does a PES of 1 mean?
A
Unitary elasticity of supply
5
Q
What does a PES of greater than 1 mean?
A
Elastic
6
Q
What is the equation for price elasticity of supply?
A
% change in quantity supplied / % change in price
7
Q
What are the factors that effect price elasticity of demand? (5)
A
Length of production period
Availability of spare capacity
Ease of accumulating stocks
The ease of switching between production methods
The number of firms in the market (and ease of entering)
