PES(Chapter 12)

Question 1

What is PES?

Answer 1

Price Elasticity of Supply measures the responsiveness of quantity supplied to a change in price.

Question 2

How to measure PES

Answer 2

% change in quantity supplied/ % change in price

= (((Final quantity - OG quantity)/OG quantity) x100)/(((Final price- OG price)/OG price ) x100)

Question 3

What affects PES

Answer 3

1. the availability of stock of finished goods and components
2. degree of unused or ‘spare’ production capacity
   3.Time period requires to adjust the scale of production

Question 4

Why is PES important?

Answer 4

It helps us understand how responsive producers are to changes in price. Basically, it tells us how much the quantity supplied changes when the price changes. This is useful because it helps us figure out if markets are working efficiently and if resources are being allocated properly. It also helps businesses make smart decisions about how much to produce and how to set prices. And even policymakers take it into account when they’re making economic policies.