Price elasticity of supply ( PES )

Question 1

What is PES ?

Answer 1

The responsiveness of the quantity supplied given a change in price

Question 2

What is the equation for PES ?

Answer 2

% change in Q supplied / % change in price

Question 3

What does > PES mean ?

Answer 3

Price elastic

Question 4

What does < PES mean ?

Answer 4

Price inelastic

Question 5

What does 0 PES mean ?

Answer 5

Perfectly inelastic

Question 6

What does infinity PES mean ?

Answer 6

Perfectly elastic

Question 7

What does 1 PES mean ?

Answer 7

Unit elastic

Question 8

Give some examples when something is PES elastic or inelastic ?

Answer 8

Production lags ( longer it is = more elastic )

Spare capacity ( more SC - More elastic )

Substitutes ( more S = easier to respond to production changes )