Price Elasticity of Supply

Question 1

What does PES stand for?

Answer 1

Price Elasticity Supply

Question 2

What does PES measure?

Answer 2

The responsiveness of Quantity Supplied to a change in the Price of a good or service

Question 3

What is the equation for PES

Answer 3

Percentage change in quantity supplied / percentage change in price

Question 4

What does a PES> 1 tell us about supply?

Answer 4

Supply is price elastic

Question 5

What does a PES<1 tell us about supply?

Answer 5

Supply is price inelastic

Question 6

What does a PES = 1 tell us about supply?

Answer 6

Supply is unit elastic

Question 7

What is does a PES = 0 tell us about supply?

Answer 7

Supply is perfectly inelastic

Question 8

What does a PES = infinity tell us about supply?

Answer 8

Supply is perfectly inelastic

Question 9

What does elastic supply mean?

Answer 9

producers can increase their output without a rise in cost or a time delay​

Question 10

What does inelastic supply mean?

Answer 10

firms find it hard to change their production in a given time period​

Question 11

What does unit elastic supply mean?

Answer 11

The change in supply is exactly the same as the change in price

Question 12

What does perfectly inelastic supply mean?

Answer 12

Supply is fixed, firms cannot change supply when price changes

Question 13

What does perfectly elastic supply mean?

Answer 13

Supply can meet any increase in demand without a change in price

Question 14

Give two factors which lead to inelastic supply

Answer 14

firms operating close to full capacity
running out of raw materials
short term
limited factors of production
low levels of stocks
planning restriction
ease and cost of factor substitution/factor mobility