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Price Elasticity of Supply
the responsiveness of quantity supplied in relation to a price change
PES Equation
% chance of quantity supplied/% change of price
Determinants of PES
PSST
PSSST
Production lag, Stocks, Spare Capacity, Substitutability of FoP, Time
Production Lag
longer production lag decreases elasticity
Stocks
more price elastic supply will be if more stocks
Spare Capacity
more price elastic if more spare capcity
Substitutability of FoP
more price elastic as you are able to move labour/capital easily
Time
Short Run inelastic as one or more variables are fixed so it is harder to vary FoP, Long Run elastic
