1. What is Price Elasticity of Supply?

Price Elasticity of Supply (PES) measures how much the quantity supplied of a good responds to a change in the price of that good. It shows the percentage change in quantity supplied resulting from a one percent change in price.

2. How Does the Calculator Work?

The calculator uses the PES formula:

Where:

• % Change in Quantity Supplied = \(\frac{Q2 - Q1}{Q1} \times 100\)
• % Change in Price = \(\frac{P2 - P1}{P1} \times 100\)
• Q1 — Initial quantity supplied
• Q2 — New quantity supplied
• P1 — Initial price
• P2 — New price

Explanation: The formula calculates the responsiveness of quantity supplied to price changes. A higher PES means supply is more sensitive to price changes.

3. Interpreting PES Values

Details:

• PES > 1: Elastic supply (supply is responsive to price changes)
• PES = 1: Unitary elastic supply
• PES < 1: Inelastic supply (supply is not very responsive to price changes)
• PES = 0: Perfectly inelastic supply
• PES = ∞: Perfectly elastic supply

4. Using the Calculator

Tips: Enter the initial and new quantities supplied, and the initial and new prices. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What factors affect PES?
A: Time period, availability of resources, mobility of factors of production, and ability to store inventory all affect PES.

Q2: How does time affect PES?
A: Supply becomes more elastic over time as producers have more time to adjust their production levels.

Q3: What's the difference between PES and PED?
A: PES measures producer responsiveness to price changes, while Price Elasticity of Demand (PED) measures consumer responsiveness.

Q4: Can PES be negative?
A: Normally no, since price and quantity supplied typically move in the same direction (law of supply).

Q5: How is PES used in business?
A: Businesses use PES to understand how easily they can increase production in response to price changes, which affects pricing strategies.