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 degree of responsiveness of quantity supplied to a change in price.

2. How Does the Calculator Work?

The calculator uses the PES formula:

Where:

• \( \%\Delta QS \) — Percentage change in quantity supplied
• \( \%\Delta P \) — Percentage change in price

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

3. Importance of PES Calculation

Details: Understanding PES helps businesses and policymakers predict how changes in price will affect the quantity of goods supplied to the market. It's crucial for pricing strategies and market analysis.

4. Using the Calculator

Tips: Enter the percentage change in quantity supplied and percentage change in price as percentages (without the % sign). Both values must be valid numbers.

5. Frequently Asked Questions (FAQ)

Q1: What does a PES value of 1 mean?
A: A PES of 1 means supply is unit elastic - the percentage change in quantity supplied equals the percentage change in price.

Q2: What's the difference between elastic and inelastic supply?
A: Elastic supply (PES > 1) means quantity supplied is very responsive to price changes. Inelastic supply (PES < 1) means quantity supplied is not very responsive to price changes.

Q3: Can PES be negative?
A: No, PES is typically positive as price and quantity supplied usually move in the same direction (higher price leads to higher supply).

Q4: What factors affect PES?
A: Factors include production time, availability of resources, mobility of factors of production, and ability to store stock.

Q5: What does perfectly elastic supply mean?
A: Perfectly elastic supply (PES = ∞) means suppliers will supply any amount at a particular price, but nothing at a lower price.