Price Elasticity Of Supply PES Flashcards
What is PES?
PES measures how much QS changes in response to a change in price
Fomula for PES
PES= %change QS / %change P
What do all PES have in common
They are all positive.
When is supply elastic?
When PES >1 it is elastic, so producers are very responsive to a change in price
When is supply inelastic
When PES is between 0 and 1, so producers are less responsive to a change in price
What factors influence PES?
1)Spare capacity
2) availability of FOP
3)State of economy
4)Stockpiles and perishability
5)Time period
What is spare capacity?
How much spare space or capacity businesses have that is not used.
When there is lots of spare capacity supply is…
Elastic
When there is little spare capacity supply is…
Inelastic
What is meant by availability of FOP?
How available and easy it is to find these FOP
If FOP are very available then price is…
Elastic
If FOP are have low availability then supply is …
Inelastic
If the state of the economy is bad, maybe because of a recession, supply will be…
Elastic
If the state of the economy is good price will be…
Inelastic
What are stockpiles
A stock of goods held in reserve