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Price elasticity of supply

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Presentation on theme: "Price elasticity of supply"— Presentation transcript:

1 Price elasticity of supply
© Hodder & Stoughton Limited 2015

2 Price elasticity of supply (PES)
PES measures the responsiveness of quantity supplied to a change in price Formula: percentage change in quantity supplied percentage change in price Theme © Hodder & Stoughton Limited 2015

3 Elastic or inelastic? Elastic supply
If the firm is able to increase supply quickly in response to a change in price, then supply is said to be price elastic in supply Inelastic supply If the firm is unable to increase supply quickly in response to a change in price, then supply is said to be price inelastic in supply Theme © Hodder & Stoughton Limited 2015

4 Factors determining PES
Time Weather conditions Ease of access to specialist equipment Planning permission and other government restrictions Stocks Spare capacity Theme © Hodder & Stoughton Limited 2015

5 Short and long-run supply
Theme © Hodder & Stoughton Limited 2015

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