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 Price Elasticity of Supply formula:

Where:

• \( \Delta Q \) — Change in quantity supplied
• \( Q \) — Initial quantity supplied
• \( \Delta P \) — Change in price
• \( P \) — Initial price

Explanation: The formula calculates the ratio of percentage change in quantity supplied to percentage change in price.

3. Interpreting PES Values

Details:

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

4. Using the Calculator

Tips: Enter all values in appropriate units. Quantity changes and price changes can be positive or negative, but initial quantity and price must be non-zero.

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 PES differ in short run vs long run?
A: Supply is typically more elastic in the long run as firms have more time to adjust production.

Q3: What does a negative PES mean?
A: PES is usually positive. A negative value might indicate an error in calculation or very unusual market conditions.

Q4: How is PES used in business decisions?
A: Businesses use PES to understand how easily they can increase production in response to price changes.

Q5: What's the difference between PES and PED?
A: PES measures supplier responsiveness to price changes, while PED (Price Elasticity of Demand) measures consumer responsiveness.