Price elasticity of supply

PES definition

A measure of responsiveness of the quantity supplied to a change in price

PES numerical answer and why

PES is always positive because of law of supply (upward sloping)

What is PES when greater than one

Price elastic

What is PES when less than one

Price inelastic

Why is something price elastic

When the percentage change in the quantity supplied is greater than the percentage change in price

Why is something price inelastic

When percentage change in quantity supplied is smaller than the percentage change in price

What is PES when 0

Perfectly price inelastic

What is PES when infinity

Perfectly price elastic

What is PES when 1

Unit price elastic

What does the PES measure tell us

Its value tells us about how sensitive the change in supply is

Determinants of PES acronym

PSSST

What does P stand for

Production lag- longer the lag the more price inelastic supply will be

What does S1 stand for

Stocks, The larger the level of stocks the more price elastic supply is going to be

What does S2 stand for

Spare capacity. More spare capacity the more price elastic supply is going to be

What does S3 stand for

Substitutability of FoPs. More substitutable fops are, the more price elastic supply is

What does T stand for

Time period. Short run supply is price inelastic, long run supply is price elastic