PES

Question 1

Define PES

Answer 1

Relationship between change in quantity supplied and a change in price

Question 2

What can producers do if supply is price elastic

Answer 2

Producers can increase their output without a rise in cost or a time delay

Question 3

What happens to producers if supply is price inelastic

Answer 3

Firms find it hard to change their production in a given time period

Question 4

PES formula

Answer 4

% change in quantity supplied / % change in price

Question 5

What does it mean when PES > 1

Answer 5

Supply is price elastic

Question 6

What does it mean when PES < 1

Answer 6

Supply is price inelastic

Question 7

What happens when PES = 0

Answer 7

Supply is perfectly inelastic (Supply Curve is drawn vertically)

Question 8

What happens when PES = infinity

Answer 8

Supply is perfectly elastic

Supply curve is drawn horizontally

Question 9

Factors affecting PES

Answer 9

Spare Production Capacity

Stocks of finished products

Ease and cost of factor mobility and substitution

Time period and production speed