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Micro > Price Elasticity Of Supply PES > Flashcards

Price Elasticity Of Supply PES Flashcards

1
Q

What is PES?

A

PES measures how much QS changes in response to a change in price

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2
Q

Fomula for PES

A

PES= %change QS / %change P

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3
Q

What do all PES have in common

A

They are all positive.

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4
Q

When is supply elastic?

A

When PES >1 it is elastic, so producers are very responsive to a change in price

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5
Q

When is supply inelastic

A

When PES is between 0 and 1, so producers are less responsive to a change in price

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6
Q

What factors influence PES?

A

1)Spare capacity
2) availability of FOP
3)State of economy
4)Stockpiles and perishability
5)Time period

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7
Q

What is spare capacity?

A

How much spare space or capacity businesses have that is not used.

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8
Q

When there is lots of spare capacity supply is…

A

Elastic

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9
Q

When there is little spare capacity supply is…

A

Inelastic

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10
Q

What is meant by availability of FOP?

A

How available and easy it is to find these FOP

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11
Q

If FOP are very available then price is…

A

Elastic

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12
Q

If FOP are have low availability then supply is …

A

Inelastic

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13
Q

If the state of the economy is bad, maybe because of a recession, supply will be…

A

Elastic

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14
Q

If the state of the economy is good price will be…

A

Inelastic

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15
Q

What are stockpiles

A

A stock of goods held in reserve

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16
Q

What are perishable goods

A

Goods that have a short life span
Eg cheese, fruit

17
Q

If you can stockpile a lot of the product then supply is…

18
Q

If you cant stockpile alot then supply is..

19
Q

In the short run, when at least one factor of production is fixed, supply is…

20
Q

In the long-run, when all factors of Production can be changed, supply is…

21
Q

What is short run in production?

A

When at least one factor of production is fixed

22
Q

What is long run in production?

A

When all FOP can be changed

23
Q

When is supply perfectly inelastic?

A

When PES =0

24
Q

What is perfectly inelastic supply?

A

When suppliers will not respond at all to a change in price
Eg. Number of tickets sold in Wembley stadium, you cannot sell more tickets than the fixed amount in the short run as there wont be enough seats

25
Q

When is supply perfectly elastic?

A

PES= infinity

26
Q

What is Perfectly elastic supply?

A

When A small change in price leads to a massive change in QS.

Micro (50 decks)

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