3.1.2.4 and 4.1.3.4 Price elasticity of supply

Price elasticity of supply (PES) measures the responsiveness ...

• of quantity supplied to a change in price
• of price to a change in quantity supplied

If supply is ... then producers can increase output without a rise in cost or a time delay

• elastic (i.e. PES > 1),
• inelastic (i.e. PES <1

If supply is ..., then firms find it hard to change production in a given time period.

• inelastic (i.e. PES <1
• elastic (i.e. PES > 1),

The formula for price elasticity of supply is:

• % change in quantity supplied divided by % change in price
• % change in price divided by % change in quantity supplied

When .... supply is perfectly inelastic

• Pes = 0
• > 1
• Pes = infinity
• < 1

When ..., then supply is price elastic

• > 1
• < 1
• Pes = infinity
• Pes = 0

When ..., then supply is price inelastic

• < 1
• > 1
• Pes = infinity
• Pes = 0

When ... , supply is perfectly elastic following a change in demand

• Pes = infinity
• > 1
• < 1
• Pes = 0

Which is correct?

• Supply elastic left, and supply inelastic right

• Supply inelastic left, and supply inelastic right

• Supply elastic left, and supply elastic right

• Supply inelastic left, and supply elastic right

If there is plenty of spare capacity, supply will be ...

• Elastic
• Inelastic