IBonomicsPrice Elasticity of Supply (PES)SL
MicroeconomicsA diagram illustrating different types of price elasticity of supply: perfectly inelastic, perfectly elastic, and unitary elastic supply curves.
Curves and elements
- perfectly inelastic
- Perfectly Inelastic Supply: Vertical line — quantity supplied remains constant regardless of price (PES = 0).
- perfectly elastic
- Perfectly Elastic Supply: Horizontal line — any quantity supplied at one fixed price (PES = ∞).
- unitary
- Unitary Elastic Supply: Upward-sloping supply curve with PES = 1 — proportional response in supply to price changes.
Key explanations
- 1
The diagram shows three types of supply elasticity, which measure how quantity supplied responds to changes in price.
- 2
A perfectly inelastic supply curve is vertical, indicating that quantity supplied does not change regardless of the price (PES = 0).
- 3
A perfectly elastic supply curve is horizontal, indicating that firms will supply any quantity at one fixed price, but nothing at any other price (PES = ∞).
- 4
A unitary elastic supply curve has a constant elasticity of 1, meaning the percentage change in quantity supplied is equal to the percentage change in price.
- 5
Elasticity of supply is influenced by factors such as time, availability of inputs, spare production capacity, and the flexibility of the production process.
Example exam question
Using a diagram, explain the difference between perfectly elastic, perfectly inelastic, and unitary elastic supply.
Show example answer
Perfectly inelastic supply is shown as a vertical line — quantity supplied is fixed and does not respond to price changes, such as stadium seats or unique antiques. Perfectly elastic supply is represented by a horizontal line — suppliers are willing to sell any amount at a specific price, often found in perfectly competitive markets. Unitary elastic supply shows proportional responsiveness, where a 10% increase in price leads to a 10% increase in quantity supplied. These curves help illustrate how flexible producers are in response to price changes.
