The Determinants of PES
Some products are more responsive to changes in prices than other products
The factors that determine responsiveness are called the determinants of PES and include:
Mobility of the factors of production If producers can quickly switch their resources between products, then the PES will be more elastic. For example, if prices of hiking boots increase and shoe manufacturers can switch resources from producing trainers to boots, then boots will be price elastic in supply
Availability of raw materials If raw materials are scarce, then PES will be low (inelastic). If they are abundant, PES will be higher (elastic)
Ability to store goods If products can be easily stored, then PES will be higher (elastic) as producers can quickly increase supply (for example, tinned food products). An inability to store products results in lower PES (inelastic)
Spare capacity If prices increase for a product and there is capacity to produce more in the factories that make those products, then supply will be elastic. If there is no spare capacity to increase production, then supply will be inelastic
Time period In the short run, producers may find it harder to respond to an increase in prices as it takes time to produce the product (e.g. avocados). However, in the long run, they can change any of their factors of production so as to produce more.
