elasticity of supply

Question 1

What is price elasticity of supply

Answer 1

is a measure of the responsiveness of supply to a change in price

Question 2

what does PES stand for

Answer 2

Price elasticity of supply

Question 3

PES formula

Answer 3

%changeinquantitysupplied/%changeinprice = PES

%Δqs/%Δp = PES

Question 4

PES coefficient

What does the following coefficient of pes mean on type of elasticity

0
0<1
1
1>∞ (infinity)
∞

Answer 4

Perfectly inelastic

Price inelastic

Unitary (constant) elasticity

Price elastic

Perfectly elastic

Question 5

what do these mean in PES

Perfectly inelastic

Price inelastic

Unitary (constant) elasticity

Price elastic

Perfectly elastic

Answer 5

The business does not change S in response to a change in P. It is fixed.

If P rises, S will increase, BUT at a lesser proportion to the increase in price.

Increasing or decreasing price will lead to a proportional change in supply.

If P rises, S will increase, BUT at a greater proportion to the increase in price.

Producers will supply any amount above a certain P.

Question 6

what are the 3 determinants of price elaticity of supply

Answer 6

price

substitutes

time

Question 7

if there is a higher PES, what does that mean of the firm’s flexibility on changing the supply

Answer 7

more flexible