What is Price Elasticity of Supply (PES)?

It shows how much the amount of a product that producers are willing to sell changes when the price changes.

Formula:

What it means:

• Elastic Supply (PES > 1): Supply changes a lot when price changes.

• Inelastic Supply (PES < 1): Supply changes only a little.

• Unit Elastic (PES = 1): Supply changes the same as price.

• Perfectly Inelastic (PES = 0): Supply doesn't change at all, no matter the price.

• Perfectly Elastic (PES = ∞): Tiny price change = huge supply change.

What affects PES?

• Time: More time = easier to change supply.

• Resources: If inputs are easy to get, supply is more flexible.

• Extra Capacity: If factories have room to make more, supply is more elastic.

• Storage: If a product can be stored, it's easier to adjust supply.