Price Elasticity of Supply PES

Question 1

What is PES?

Answer 1

Measures the responsiveness of quantity supplied given a change in price

Question 2

PES Equation

Answer 2

PES= %ΔQS/%ΔP

Question 3

Is PES positive or negative?

Answer 3

ALWAYS Positive, (Law of supply - when price goes up, quantity supplied goes up, vice versa)

Question 4

Price Elastic

Answer 4

> 1

Question 5

Price Inelastic

Answer 5

<1

Question 6

Perfectly Price Inelastic

Answer 6

0

Question 7

Perfectly Price Elastic

Answer 7

∞

Question 8

Unitary Price Elastic

Answer 8

1

Question 9

What does being price inelastic mean?

Answer 9

The quantity supplied changes by a smaller percentage than the price change

Question 10

What does being price elastic mean?

Answer 10

The quantity supplied changes by a larger percentage than the price change

Question 11

Determinants of PES

Answer 11

PSSST

Production Lag
Stocks
Spare Capacity
Substitutability of FoP’s (Factors of Production)
Time

Question 12

What does an elastic line look like on a graph

Answer 12

More Horizontal

Question 13

What does an inelastic line look like on a graph

Answer 13

More Vertical