Price Elasticity Of Supply(PES)

Question 1

PES

Answer 1

The response of supply to a change in price

Question 2

Formula

Answer 2

% change in QS/ % change in Price

Question 3

Values

Answer 3

0-1= Relatively Inelastic 
1= Unit Elastic 
>1= Relatively Elastic 

ALWAYS POSITIVE- if price goes up or down the quantity supplied does not respond

Question 4

Determinants

Answer 4

• Spare capacity- the difference between what a firm can produce and what it is producing. The more spare capacity there is the more elastic supply there is. When there is no spare capacity there is Inelastic supply
• availability to substitute FOP-changes to FOP to meet customers wants
• Time e.g. firms want 12 yrs whiskey-have yo wait 12 yrs. good for long term