Price Elasticity of SUpply

Price Elasticity of Supply (PES)

% change in quantity supplied ÷ % change in price.

Elastic Supply

PES > 1; producers can adjust output easily.

Inelastic Supply

PES < 1; output is hard to change.

Unit Elastic Supply

PES = 1.

Perfectly Elastic Supply

horizontal supply curve (ANY price change = qDemanded completely 0)

Perfectly Inelastic Supply

Characterized by a vertical supply curve. (people buy no matter price)

Surplus

Excess supply at a price above equilibrium.

Momentary Supply

Very short run; quantity is fixed (perfectly inelastic).

Short-Run Supply

Some inputs are fixed; limited flexibility.

Long-Run Supply

All inputs are variable; firms can enter or exit the market.

Alternative Input

A different resource that can substitute in production, increasing supply flexibility.