Price Elasticity of Supply ( PES)

Price elasticity of supply is a way to measure how suppliers respond to a change in price.

Supply can be either price elastic or price inelastic.

Example 1( A price elastic supplier):

 There has been a very small change in demand causing the price to go up a bit. This small change in price has produced a huge rise in the quantity of products supplied. SUPPLY IS PRICE ELASTIC.

Example 2( A price in-elastic supplier)

There has been a shift in demand making the price rise a lot. Despite this huge rise in price the extension ( movement along the line making the supply rise) in supply is small. SUPPLY IS PRICE INELASTIC

Equation to measure PES:

PES = % change in quantity supplied/ % change in price

How to calculate PERCENTAGE CHANGE:

Change in quantity/ Old quantity

The previous equation will give you a decimal such as 0.65, this is another way to express percentages, it means 65 percent. For this reason, you multiply x100 to get the percentage.