Micro 16 - Price elasticity of supply

Question 1

What is PES?

Answer 1

PES measures how QTY Supplied changes in response to a change in price

Question 2

PES Calculation

Answer 2

%change in QS / %change in price

Question 3

What are the determinants of PES?

Answer 3

If the supply of one thing takes a long time, supply will be inelastic (e.g -> building houses)

If the good is an agricultural good

Question 4

Why does housing have a low PES?

Answer 4

Planning permissions
Access to factors of production

Question 5

How could the supply of housing become more elastic?

Answer 5

Supply for housing could become more elastic if greenbelt policies are changed

Question 6

Is it desirable for a firm to have a high PES?

Answer 6

Yes because they can respond to demand quicker.

Question 7

Why does the impact in the shift of a demand curve depend upon the price elasticity of supply?

Answer 7

When supply is very price elastic and there is a shift in the demand curve to the right, the change in QTY will be more proportional to the change in price.

The reverse is also true