Lesson 9- Price elasticity of supply

Question 1

Define PES

Answer 1

The responsiveness of supply to a change in price

Question 2

How to calculate PES

Answer 2

Percentage change in quantity supplied/ Percentage change in price

Question 3

What is the value for Perfectly inelastic supply?

Answer 3

0

Question 4

What is the value for Perfectly elastic supply?

Answer 4

infinity

Question 5

What is the value for elastic supply?

Answer 5

More than 1

Question 6

What is the value for Inelastic supply?

Answer 6

Less than 1

Question 7

What is the value for Unitary Elastic Supply?

Answer 7

1

Question 8

What are the factors affecting elasticity of supply? (3)

Answer 8

1.In the short run supply will be elastic but this depends on the availability of existing stocks. If there is excess stock supply will be elastic, if there are less stocks, supply will be inelastic
2.Capital intensive methods of production will have elastic supply, labor intensive methods of production will have inelastic supply.
3. If the firm has spare capacity it will have elastic supply, if the firm is running at full potential then supply will be inelastic.

Question 9

What is the elasticity of supply for agricultural goods? (1)

Answer 9

1. Agricultural goods have inelastic supply in the short run but in the long run has elastic supply. However in the short run the supply can be made elastic if there are available stocks and also using modern production techniques such as GM crops.