Karthikeyan

Price Elasticity of Supply (PES)

• Definition: PES measures how much the quantity supplied of a good changes when its price changes.

• Formula:

  

• Elastic Supply (PES > 1): Supply changes more than price.

• Inelastic Supply (PES < 1): Supply changes less than price.

• Unitary Supply (PES = 1): Supply changes exactly as price.

• Factors affecting PES:

  • Time period (more time → more elastic)

  • Availability of resources

  • Storage ability

  • Production speed