Price Elasticity of Supply Flashcards
1
Q
What is PES?
A
the responsiveness of quantity supplied as a result of a change in price
2
Q
Equation for PES:
A
% change in quantity supplied/ % change in price
3
Q
Values of PES:
A
0- Perfectly inelastic < 1- price inelastic 1- unitary > 1- price elastic infinite- perfectly elastic
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
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