Price Elasticity Of Supply (PES)

What is Price Elasticity of Supply (PES)?

The responsiveness of quantity supplied to a change in price.

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What is the formula for PES?

PES= %ΔQS​ / %ΔP

What does PES = 0 mean?

Perfectly inelastic supply – quantity supplied does not respond to price changes (vertical supply curve).

e.g fixed number of theatre seats

What does 0 < PES < 1 mean?

Relatively inelastic supply – quantity supplied changes less than proportionally to price.

e.g agricultural products

What does PES > 1 mean?

Relatively elastic supply – quantity supplied changes more than proportionally to price.

e.g manufactured goods like t-shirts

What does PES = ∞ mean?

Perfectly elastic supply – unlimited supply at one price (horizontal supply curve, mostly theoretical).

How does factor mobility affect PES?

If resources can easily switch between products, supply is more elastic.

How does spare capacity affect PES?

More spare capacity → more elastic supply because firms can increase production quickly.

How does the ability to store goods affect PES?

Goods that can be stored easily have more elastic supply.

How does time affect PES?

• Short run: supply is more inelastic

• Long run: supply becomes more elastic