Price Elasticity of supply - Unit 1 Flashcards
1
Q
What does PES do?
A
It measures the responsiveness of quantity supplied to a change in price
2
Q
How do you measure PES?
A
%change in quantity supplied/%change in price
3
Q
If PES is more than 1 what is it?
A
Price elastic
4
Q
If PES is less than 1 what is it?
A
Price inelastic
5
Q
What does elasticity of supply depend on?
A
- time (responsiveness)
- availability of resources - land, labour, capital
- availability of spare capacity
- length of production period
- ability to store products
6
Q
Why do commodities and agricultural goods prices fluctuate so much?
A
Both PES + PED are inelastic
