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Reuben Cowell
04/02/2023
Economics
1.3.6 Price Elasticity of Supply (PES)
297
•
4 Feb 2023
•
Fun with Price Elasticity: Easy Examples and Formulas
Reuben Cowell
@reubencowell
Measuring Price Elasticity of Supply
This page delves into the methods of measuring Price Elasticity of Supply (PES) and introduces the concept of PES coefficients. The price elasticity of supply formula is presented as:
PES = (% change in quantity supplied) / (% change in price)
This formula allows us to calculate the PES coefficient, which helps determine the elasticity of a product's supply. The interpretation of the PES coefficient is as follows:
- If the resulting figure is more than 1, it is a price elastic product.
- If the resulting figure is less than 1, it is a price inelastic product.
- If the resulting figure is equal to 1, it is unitary price elastic.
Example: If a 10% increase in price leads to a 15% increase in quantity supplied, the PES would be 15% / 10% = 1.5, indicating an elastic supply.
The page also introduces PES supply graphs, providing visual representations of different elasticity scenarios. An example of a price inelastic supply graph is shown, where PES < 1. In this case, when the price increases, the quantity supplied increases by a less than proportional amount.
Highlight: The PES coefficient and supply graphs are essential tools for understanding and visualizing how supply responds to price changes in different market scenarios.
These concepts are crucial for analyzing market behavior and making predictions about supply responses to price fluctuations in various industries.
PES Supply Graphs and Perfect Elasticity Concepts
This page expands on the graphical representations of Price Elasticity of Supply (PES) and introduces the concept of perfect elasticity. It presents examples of different supply graphs and their interpretations.
The first graph shown is an example of a price elastic supply graph, where PES > 1. This means that when the price increases, the supply can increase by a more than proportional amount. This type of supply is common in industries where production can be easily scaled up or down.
Example: The supply of digital products, such as e-books or software, often exhibits high elasticity as production can be quickly increased to meet demand.
The page then introduces the concept of 'perfect supply elasticity' graphs. These graphs represent theoretical extremes that would never occur in real life but are important for understanding the concept of elasticity:
- Perfectly inelastic supply (PES = 0): A change in price will not affect supply at all.
- Unitary elastic supply (PES = 1): A change in price will be affected proportionally by a change in supply.
- Perfectly elastic supply (PES = infinity): There is no change in price when quantity changes.
Highlight: While perfect elasticity scenarios are theoretical, they help in understanding the range of possible supply responses to price changes.
The page concludes by emphasizing that these perfect elasticity scenarios are conceptual and do not occur in real-world markets. However, understanding these extreme cases helps in analyzing and interpreting actual market behaviors and supply responses to price changes.
Vocabulary: Inelastic supply refers to a situation where the quantity supplied changes by a smaller percentage than the price change. Unitary elastic supply occurs when the percentage change in quantity supplied equals the percentage change in price.
These concepts are fundamental in economics for analyzing market dynamics, predicting supply responses, and formulating effective pricing strategies.
Price Elasticity of Supply (PES)
Price Elasticity of Supply (PES) is a fundamental concept in economics that measures how responsive the quantity supplied of a good is to changes in its price. This page introduces the basic principles of PES and its classifications.
When the price of a normal good changes, the supply of the good will also change to a certain extent, determined by its price elasticity of supply. The elasticity of supply can be categorized into three main types:
- Price elastic: The supply of a good changes more than proportionally to the price.
- Price inelastic: The supply of a good changes less than proportionally to the price.
- Unitary elastic: The supply of a good changes proportionally to the price.
Definition: Price elasticity of supply refers to the responsiveness of quantity supplied to changes in price.
The page also introduces the factors affecting PES, which include:
- Price of the product: A higher price incentivizes firms to increase production and not change markets.
- Availability of producer substitutes: If it's easy for firms to switch production, the PES will be higher as it's easier to increase supply.
- Time: In the short run, it's harder for producers to increase supply compared to the long run.
Highlight: The ease with which producers can switch production and the time frame considered are crucial factors in determining the price elasticity of supply.
Understanding these factors is essential for businesses and policymakers to make informed decisions about production and pricing strategies in various market conditions.
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Stefan S
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This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
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Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
Fun with Price Elasticity: Easy Examples and Formulas
Reuben Cowell
@reubencowell
Price elasticity of supply (PES) is a crucial concept in economics that measures how responsive the quantity supplied of a good is to changes in its price. This summary explores the factors affecting PES, its measurement, and graphical representations.
Factors... Show more
Measuring Price Elasticity of Supply
This page delves into the methods of measuring Price Elasticity of Supply (PES) and introduces the concept of PES coefficients. The price elasticity of supply formula is presented as:
PES = (% change in quantity supplied) / (% change in price)
This formula allows us to calculate the PES coefficient, which helps determine the elasticity of a product's supply. The interpretation of the PES coefficient is as follows:
- If the resulting figure is more than 1, it is a price elastic product.
- If the resulting figure is less than 1, it is a price inelastic product.
- If the resulting figure is equal to 1, it is unitary price elastic.
Example: If a 10% increase in price leads to a 15% increase in quantity supplied, the PES would be 15% / 10% = 1.5, indicating an elastic supply.
The page also introduces PES supply graphs, providing visual representations of different elasticity scenarios. An example of a price inelastic supply graph is shown, where PES < 1. In this case, when the price increases, the quantity supplied increases by a less than proportional amount.
Highlight: The PES coefficient and supply graphs are essential tools for understanding and visualizing how supply responds to price changes in different market scenarios.
These concepts are crucial for analyzing market behavior and making predictions about supply responses to price fluctuations in various industries.
Sign up to see the contentIt's free!
Access to all documents
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Join milions of students
By signing up you accept Terms of Service and Privacy Policy
PES Supply Graphs and Perfect Elasticity Concepts
This page expands on the graphical representations of Price Elasticity of Supply (PES) and introduces the concept of perfect elasticity. It presents examples of different supply graphs and their interpretations.
The first graph shown is an example of a price elastic supply graph, where PES > 1. This means that when the price increases, the supply can increase by a more than proportional amount. This type of supply is common in industries where production can be easily scaled up or down.
Example: The supply of digital products, such as e-books or software, often exhibits high elasticity as production can be quickly increased to meet demand.
The page then introduces the concept of 'perfect supply elasticity' graphs. These graphs represent theoretical extremes that would never occur in real life but are important for understanding the concept of elasticity:
- Perfectly inelastic supply (PES = 0): A change in price will not affect supply at all.
- Unitary elastic supply (PES = 1): A change in price will be affected proportionally by a change in supply.
- Perfectly elastic supply (PES = infinity): There is no change in price when quantity changes.
Highlight: While perfect elasticity scenarios are theoretical, they help in understanding the range of possible supply responses to price changes.
The page concludes by emphasizing that these perfect elasticity scenarios are conceptual and do not occur in real-world markets. However, understanding these extreme cases helps in analyzing and interpreting actual market behaviors and supply responses to price changes.
Vocabulary: Inelastic supply refers to a situation where the quantity supplied changes by a smaller percentage than the price change. Unitary elastic supply occurs when the percentage change in quantity supplied equals the percentage change in price.
These concepts are fundamental in economics for analyzing market dynamics, predicting supply responses, and formulating effective pricing strategies.
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Price Elasticity of Supply (PES)
Price Elasticity of Supply (PES) is a fundamental concept in economics that measures how responsive the quantity supplied of a good is to changes in its price. This page introduces the basic principles of PES and its classifications.
When the price of a normal good changes, the supply of the good will also change to a certain extent, determined by its price elasticity of supply. The elasticity of supply can be categorized into three main types:
- Price elastic: The supply of a good changes more than proportionally to the price.
- Price inelastic: The supply of a good changes less than proportionally to the price.
- Unitary elastic: The supply of a good changes proportionally to the price.
Definition: Price elasticity of supply refers to the responsiveness of quantity supplied to changes in price.
The page also introduces the factors affecting PES, which include:
- Price of the product: A higher price incentivizes firms to increase production and not change markets.
- Availability of producer substitutes: If it's easy for firms to switch production, the PES will be higher as it's easier to increase supply.
- Time: In the short run, it's harder for producers to increase supply compared to the long run.
Highlight: The ease with which producers can switch production and the time frame considered are crucial factors in determining the price elasticity of supply.
Understanding these factors is essential for businesses and policymakers to make informed decisions about production and pricing strategies in various market conditions.
We thought you’d never ask...
What is the Knowunity AI companion?
Our AI Companion is a student-focused AI tool that offers more than just answers. Built on millions of Knowunity resources, it provides relevant information, personalised study plans, quizzes, and content directly in the chat, adapting to your individual learning journey.
Where can I download the Knowunity app?
You can download the app from Google Play Store and Apple App Store.
Is Knowunity really free of charge?
That's right! Enjoy free access to study content, connect with fellow students, and get instant help – all at your fingertips.
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App Store
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Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user