Price Elasticity of Supply (PES)

Question 1

What is PES?

Answer 1

it measures the responsiveness of supply to changes in price - different ranges of elasticity are given different names

Question 2

What is perfectly inelastic (0)?

Answer 2

if there is no response in supply to a change in price

Question 3

What is inelastic (between 0 and 1)?

Answer 3

if there is a less than proportionate response in supply to a change in price

Question 4

What is unitary (1)?

Answer 4

if the percentage change in quantity supplied equals the percentage change in price

Question 5

What is elastic (between 1 and infinity)?

Answer 5

if there is a more than proportionate response in supply to a change in price

Question 6

What is perfectly elastic (infinity)?

Answer 6

if producers are prepared to supply any amount at a given price

Question 7

What is the formula for price elasticity of supply?

Answer 7

percentage change of quantity supplied/percentage change of price

Question 8

Will the price elasticity of supply be positive or negative?

Answer 8

positive because both numerator and denominator are either positive or negative

Question 9

What does elastic supply tell you about the product?

Answer 9

producers can increase production without cost or delay

Question 10

What does inelastic supply tell you about the product?

Answer 10

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