2.6 - Price elasticity of supply Flashcards
1
Q
Define PES
A
Responsiveness of quantity supplied to a change in price
2
Q
State the PES formula
A
% change in Qs / % change in P
3
Q
Is PES normally positive or negative
A
Positive
4
Q
Elastic PES
A
PES > 1
5
Q
Unitary PES
A
PES = 1
6
Q
Inelastic PES
A
PES < 1
7
Q
List the 3 determinants of PES
A
- Time
- Availability of factors of production
- Stock and used capacity
8
Q
Explain time as a determinant of PES
A
In the short rune, PES tends to be more inelastic whilst in the long run, it tends to be more elastic.
9
Q
Explain availability of factors of production as a determinant of PES
A
The easier it is for producers to access factors of production, the more elastic PES tends to be.
10
Q
Explain stock and used capacity as a determinant of PES
A
PES tends to be relatively elastic when producers have spare capacity because producers can easily meed demand when price increases.
