Price Elasticity Of Supply, is the measure of the responsiveness of supply to a change in price.
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The Formula used to calculate Price Elasticity Of Supply is:
Q1 = Old Quantity
Q2 = New Quantity
P1 = Old Price
P2 = New Price
If the answer using the above formula is less than 1 than the product has price inelastic supply
however, if the answer is greater than 1 than the product has price elastic supply.
Price Elastic Supply: When supply changes by a greater percentage than the change in price.
Price In Elastic Supply: When supply changes by a smaller percentage than the change in price.
Types OF Price Elasticity Of Supply:
Factors Affecting Price Elasticity Of Supply:
Gestation period is the time period needed in which goods and services can be produced.
Longer gestation period(e.g. wheat) Inelastic PES
Shorter gestation period(e.g. bread) Elastic PES
Nature of The Product:
Perishable (can’t be stored for a longer period) Inelastic PES
Durable (can be stored for a longer period) Elastic PES
Availability of Raw Materials:
Not easily available (wood for wooden furniture) Inelastic PES
Easily available (plastic for plastic furniture) Elastic PES
Easily available Inelastic PES
Not easily available Elastic PES