Price elasticity of supply Flashcards
What is price elasticity of supply
a measure of the sensitivity of quantity supplied of a good or a service to a change in the price of that good or service
What is price elasticity of supply always
positive
What is the abbreviation of price elasticity of supply
PES
What is the PES equation
% change in the quantity supplied/ % change in price
When is there price elasticity supply
when PES is greater than 1
When is there price inelastic supply
when PES is less than 1
What does the value of price elasticity of supply depend on
how willing and able firms are to respond to a change in price
What affects the willingness of a firm to expand output
wether they expect their price change to be temporary or permanent
What is the short run
the period in which at least one factor of production is fixed in supply
What is the long run
the period in which all factors of production are flexible in supply
What does supply in the long run look like on a graph
more horizontal (more elastic)
What does supply in the short run look like on a graph
more vertical (less elastic)
In the short run what is difficult to vary
capital inputs
In the short run what is easier to vary
labour inputs
What is perfect inelastic supply
a situation ion which firms can supply only a fixed quantity so cannot increase or decrease the amount available
