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16 questions and answers verified 2024
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1.2 Price elasticity of Supply (PES)The price elasticity of supply is the - correct answer ✔responsiveness of S of
a good to its change in P
PES = - correct answer ✔% change in QS / % change in P
PES will always be positive because when the - correct answer ✔price of a
good increases, more will be supplied
When not given P or QS use - correct answer ✔10% as P to work out QS
When PES is more than 1 supply is - correct answer ✔price elastic as the %
change in price will lead to a greater proportionate change in QS
When PES is less than 1 supply is - correct answer ✔price inelastic as the %
change in price will lead to a smaller proportionate change in QS
When PES=1 supply is - correct answer ✔unitary elastic as a % change in
price will lead to the same % change in QS
When PES=0 supply is - correct answer ✔perfectly inelastic as a % change
in price will have no impact on supply
When PES=infinity supply is - correct answer ✔perfectly elastic as change in
price will lead to an infinite amount being supplied
The perfectly elastic supply curve is - correct answer ✔horizontal
, The perfectly inelastic supply curve is - correct answer ✔vertical
The relatively elastic supply curve is - correct answer ✔slightly tilted
horizontal line
The relatively inelastic supply curve is - correct answer ✔slightly tilted
vertical line
Factors that influence PES are: - correct answer ✔The level of spare
capacity,
The state of the economy,
How easily production can be switched to a different product,
The level of stock,
Perishability of goods,
Can new firms easily enter the market?,
Availability of substitutes,
Short or long run,
Nature of the product
The level of spare capacity- If firms have spare capacity, this means that
output can be increased quickly if the price of a good increase, this is called -
correct answer ✔elastic
But if firms do not have any other spare capacity, they may not be able to
increase output if the price of a good rises, this is called - correct answer
✔inelastic
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