Price Elasticity of Supply

PES

Price elasticity of supply

Formula for PES

%change in quantity supplied/%change in price

4 Factors affecting PES

Spare production capacity, stocks of finished products, length of production process and time.

What is PES

How responsive producers react to a change in price.

Inelastic supply

when a change in price results in a smaller change in supply

Elastic supply

when a change in price results in a big change in supply

Perfectly elastic

When PES is infinite making producers produce an infinite amount at any given price

Perfectly inelastic

When PES is 0 making quantity supplied fixed at any given price

Unitary elastic

Change in price is equal to change in supply

Spare capacity

When a firm or economy can produce more with existing resources without needing to anything extra

Production period

The time period where it takes raw materials into finished goods.

short run

the time period in which at least one input is fixed

Long run

time period where all inputs can be changed