PES

Question 1

change

Answer 1

occurs when something transforms from its initial state or condition to a new state or condition

Question 2

Price elasticity of supply (PES)

Answer 2

a measure of how much the quantity supplied of a good changes when there is a change in its own price

Question 3

PES=

Answer 3

% change in the quantity supplied of good X / % change in the price of good X, %△Qs / %△P

Question 4

sign of PES

Answer 4

it’s always a positive number because the price and the quantity supplied always move in the same direction

Question 5

PES>1

Answer 5

price elastic supply, a change in price leads to a proportionately greater change in the quantity supplied. The quantity supplied is relatively responsive to price. Producers are relatively sensitive to price changes. Supply will be elastic if the curve passes through the vertical axis (y -axis).

Question 6

0<PES<1

Answer 6

price inelastic supply, a change in price leads to a proportionately smaller change in the quantity supplied. The supply is relatively unresponsive to price. Producers are relatively insensitive to price changes. A supply curve will always be inelastic if it passes through the horizontal axis (x -axis)

Question 7

PES=1

Answer 7

unitary elastic supply, a change in price leads to an equal change in the quantity supplied. Producers are proportionally sensitive to price changes. Therefore, the value for PES will be exactly equal to one.
Any curve that passes through the origin (0,0) has a PES = 1.

Question 8

PES = 0

Answer 8

perfectly inelastic supply, a change in price leads to no change in the quantity supplied. The supply is not responsive to price; producers of that good are not sensitive to price changes.
In this case the value of PES is zero. y=0

Question 9

PES=∞

Answer 9

perfectly elastic supply, a tiny change in price would lead to an infinite change in the quantity supplied. The percentage change in the quantity supplied is infinite. x=0

Question 10

the flatter the supply curve

Answer 10

the more elastic supply is at any given price

Question 11

Determinants of price elasticity of supply (PES)

Answer 11

The time period considered, Mobility (flexibility) and cost of factors of production, Unused capacity, Ability to store stock, rate at which cost of production increases