3.4 price elasticity of supply

Question 1

what is the price elasticity of supply

Answer 1

it measures how responsive quantity supplied is to price changes

Question 2

what is the formulae for price elasticity of supply

Answer 2

% change in the quantity supplied /

% change in price

Question 3

when is supply inelastic and when is it elastic

Answer 3

PES > 1 = elastic supply
1 > PES > 0 = inelastic supply
ALWAYS A POSITIVE NUMBER

Question 4

what factors influence price elasticity of supply PES

Answer 4

availability of stock- if they have reserve stock they can quickly respond to increases in demand so are more elastic, perishable goods are more inelastic

availability of spare capacity - unused machines and workers can quickly produce more if needed - more elastic

time - longer production process the more price inelastic supply

mobility of factors of production - more flexible labour and more versatile machines - more elastic

ease of entry into the market - more firms - more elastic