2.7 Price Elasticity of Supply Flashcards
(5 cards)
1
Q
Define price elasticity of supply
A
The responsiveness of its quantity supplied it to changes in its price
2
Q
Formula for PES?
A
%change in quantity supplied / %change in price
3
Q
What are 2 determinants of PES?
A
- Time of Production
- Availability of resources
4
Q
Explain how time of production determines PES
A
If the product can be quickly produced, it will have a price elastic supply as the product can be quickly supplied at any price; vice versa
5
Q
Explain how availability of resources determines PES
A
More resource (land, labour, capital) will make way for an elastic supply. If there are not enough resources, producers will find it difficult to adjust to the price changes, and supply will become price inelastic.
