Elasticity (Supply) Flashcards
1
Q
What is the price elasticity of supply ?
A
Responsiveness of a change in supply to a change in price
2
Q
What is the Formula for PES?
A
PES=%(change)QS/%(change)P
3
Q
If price is elastic ..
A
PES>1, firms can increase supply at little cost
4
Q
If supply is inelastic…
A
PES<1, an increase in supply will be expensive
5
Q
A perfectly inelastic supply has …
A
PES=0
6
Q
Supply is perfectly elastic when …
A
PES=Infinity
7
Q
Factors influencing PES:
A
-Time scale- short term-inelastic, vice versa
-Spare capacity
-Barriers to entry
-How substitute able factors are
8
Q
Factors affecting XED ?
A
Type of good
9
Q
Factors affecting IED ?
A
Nature of good, versatility of the good
10
Q
Factors influencing PED ?
A
-Necessity
-Substitutes
-Addictiveness (Fags)
-Durability of good
-Long and short run long run ( price elastic)
