Please enable JavaScript.
Coggle requires JavaScript to display documents.
Unit 2 Microeconomics PES - Coggle Diagram
Unit 2 Microeconomics PES
Definition
Price Elasticity of Supply (PES)
a measure of how much the quantity supplied of a good changes when there is a change in its OWN price
Formula
PED=(%change in quantity supplied of good x)/(%change in price of good x)
%change=(new-old)/old*100
situation
PES=0-1 price inelastic supply
PES=0 perfectly inelastic supply
PES>1 price elastic supply
PES=1 unit or unitary elastic supply
PED=∞ perfectly elastic supply
Determiniants of PES
Mobility/Flexibility of Production
How flexible are the resources used to make the product? Can it be changed easily?
Unused Capacity
Is the firm operating at maximum efficiency or can they easily increase their output?
Storage Ability
Does the firm have the ability to store stock and increase the quantity supplied by going to the warehouse? Can the products be stored at all?
Rate of Production Costs
How expensive and scarce are the resources used? Can they easily obtain more?
Refresher
Manufactured Good
Clothes, Machinery, Cars
Primary Commodity
Raw Materials and food such as Agriculture, Gold, Oil, Diamonds
Primary Commodities PES
Due to the high investment and long time periods of work, primary commodities typically have a low PES (inelastic supply) compared to manufactured goods.