Price Elasticity of Supply (PES)
Elasticity of Supply
AO2·AO4·Diagram required
Syllabus requirement
Measures the responsiveness of quantity supplied to a change in price.
Assessment objectives
AO2 Application and AnalysisAO4 Use of Appropriate Skills
Required diagram: Basic supply curve diagram showing a change in price leading to a change in quantity supplied (movement along the supply curve).
Summary
Price elasticity of supply (PES) measures how much the quantity supplied of a product changes in response to a change in its price, calculated as the percentage change in quantity supplied divided by the percentage change in price. The topic explains the difference between price-elastic and price-inelastic supply, shows why PES values are positive (because of the law of supply), and discusses how time and production constraints make some supplies less responsive to price changes. Understanding PES helps predict how quickly firms can adjust output and the short-run effects of price changes on market supply.
