Chapter 12: Price elasticity of supply

Question 1

Price elasticity of supply (PES)

Answer 1

A measure of the responsiveness of the quantity supplied to a change in price

Question 2

Formula for PES

Answer 2

Percentage change in quantity supplied divided by percentage change in price

Question 3

Elastic supply

Answer 3

When the quantity supplied changes by a greater percentage than the change in price

Question 4

Inelastic supply

Answer 4

When the quantity supplied changes by a smaller percentage than the change in price

Question 5

Three main factors that determine PES

Answer 5

The time taken to produce it, The cost of altering its supply (how fast you can make it) , the feasibility of storing it

Question 6

Perfectly inelastic supply

Answer 6

When a change in price has no effect in the quantity supplied

Question 7

Perfectly elastic supply

Answer 7

When a change in price causes a complete change in the quantity supplied

Question 8

Unit PES

Answer 8

When a change in price causes an equal change in the quantity supplied