PES

Question 1

What is Price elasticity of supply

Answer 1

The price elasticity if supply measures how the quantity of supply reacts to a change in price

Question 2

Why do business want a high elasticity of supply

Answer 2

So that they can react quickly to changes in price and demand

Question 3

What are three ways a business can increase elasticity of supply

Answer 3

1. Improve their technology
2. Introduce flexible working patterns
3. Have excess production capacity

Question 4

Elastic supply value

Answer 4

PES > 1, so a higher PES value means more elastic supply

Question 5

Inelastic supply value

Answer 5

PES < 1 but is > 0, so a smaller PES value means more inelastic supply

Question 6

Unit elasticity of supply value

Answer 6

PES = 1, percentage change in quantity supplied = percentage change in price

Question 7

Three factors affecting the elasticity of supply

Answer 7

1. Firm agility - keep high levels of stock
   2 Whether the good is perishable
2. Whether the economy is in a recession