• Price Elasticity of Supply is the responsiveness of the quantity supplied to a change in price

  • PES = % change is supply / % change in price

  • Below is a photo summarizing all the types of price elasticity

    • PES = 0 ; Change o=in price will have no effect on quantity supplied. Supply is perfectly inelastic. In the immediate time period supply curve is this.
    • PES = infinity ; Perfectly elastic supply. any change in price will cause an infinite change in quantity supplied
    • PES < 1; inelastic supply. less than proportionate change
    • PES > 1; elastic supply; greater than proportionate change
    • PES = 1; Unit elasticity; proportionate change.

    Screenshot 2021-08-17 at 9.12.21 PM.png

  • Factors affecting PES:

    • Time period : Amount of time over which PES is measured . Longer the tie, greater the elasticity. Immediate time period: all FOPs fixed; perfectly inelastic. Short run: labour and resources not fixed; more elastic than immediate time period. Long run: can increase all FOPs so value of PES is the most elastic.
    • Existence of unused capacity : If productive resources are not fully used, output can be increased easily without costs.
    • Marginal Cost: The cost of producing one more unit, if high, PES will be inelastic, vice versa
    • Mobility of FOPs: if FOPs can easily be switched from one productive use to another, then PES will be relatively inelastic.
    • The ability to stock: If a firm is storing high levels of stock, it can react swiftly to a change in price and PES will be relatively more elastic