Price Elasticity of Supply Flashcards

1
Q

What is PES?

A

the responsiveness of quantity supplied as a result of a change in price

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2
Q

Equation for PES:

A

% change in quantity supplied/ % change in price

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3
Q

Values of PES:

A
0- Perfectly inelastic
< 1- price inelastic
1- unitary
> 1- price elastic
infinite- perfectly elastic
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4
Q

Factors affecting PES:

A
  • Spare production capacity
  • Stocks of finished products and components
  • Ease and cost of factor substitution/factor mobility
  • Time period and production speed
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5
Q

How to improve PES in a competitive market:

A
  • use latest technology
  • provide training for workers
  • having flexible workers who can do a range of jobs
  • developing better distribution systems
  • prolonging the shelf life of products
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