chapter 12 - pes Flashcards

1
Q

definition of:

price elasticity of supply

A

measures the degree of responsiveness of quantity supplied of a product following a change in its price

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2
Q

calculating pes

A

percentage change in quantity supplied/ percentage change in pricing

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3
Q

price elastic supply

A

quantity supplied is responsive to changes in price

  • pes greater than 1
  • plenty of spare capacity
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4
Q

price inelastic supply

A

quantity supplied not responsive to changes in prices

  • pes less than 1
  • firms little spare capacity
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5
Q

perfectly price elastic supply

A

quantity supplied can change without any corresponding change in price, have spare capacity so can raise output at current price level

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6
Q

perfectly price inelastic supply

A

a change in price has no impact on quantity supplied, no spare capacity to raise output

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7
Q

unitary price elasticity supply

A

change in price is proportional to change in quantity supplied

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8
Q

determinants of pes

A
  • degree of space capacity
  • level of stocks
  • number of producers
  • ease and costs of substitution
  • time period
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9
Q

significance of pes for decision makers

A

be more responsive to changes in price, helps to be more competitive

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10
Q

how to be more responsive to changes in market price?

A
  • create spare capacity
  • train employees
  • adopting latest technology
  • keep large volumes of sticks
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