Price elasticity of supply
| English | Chinese | Pinyin |
|---|---|---|
| price elasticity of supply | 供给价格弹性 | gōng jǐ jià gé tán xìng |
| elastic | 富有弹性 | fù yǒu tán xìng |
| inelastic | 缺乏弹性 | quē fá tán xìng |
| spare capacity | 闲置产能 | xián zhì chǎn néng |
| mobility of factors | 要素流动性 | yào sù liú dòng xìng |
Why farmers can't react overnight
- If strawberry prices jump, a factory can boost output in days — but a farmer must wait a whole growing season. Producers differ in how fast they respond.
- Price elasticity of supply 供给价格弹性 (PES) measures that responsiveness.
Measuring PES
- PES measures how quantity supplied responds to a price change:
- It is normally positive (price and quantity supplied move together).
Equilibrium price and quantity where demand meets supply
Demand & supply
Supply elasticity is how much quantity responds to price.
Price rises 20% and quantity supplied rises 30%. What is the PES?
PES = 30% / 20% = 1.5 — elastic.
PES = (% change in quantity supplied) ÷ (% change in ______).
PES divides the % change in quantity supplied by the % change in price.
Elastic 富有弹性 vs inelastic 缺乏弹性 supply
- $\text{PES} > 1$ → elastic (output responds easily — spare capacity 闲置产能, easy to store).
- $\text{PES} < 1$ → inelastic (output is hard to change quickly — farming, limited capacity).
A steep supply curve is inelastic; a flat one is elastic. Spare capacity and time make supply more elastic.
Worked example. Price rises 20% and quantity supplied rises 30%. PES $= \dfrac{30\%}{20\%} = 1.5$ — elastic.
Supply is elastic when PES is:
PES > 1 means quantity supplied responds strongly to price.
Why is the supply of a farm crop usually inelastic in the short run?
Production takes a season, so quantity supplied can't respond quickly to price — inelastic.
Time is the key
- The longer the time period, the more elastic supply becomes — firms can build capacity, hire, and adjust.
- Other determinants: spare capacity, ease of storing stock, and mobility of factors 要素流动性.
Supply tends to be more elastic over a longer time period.
Given time, firms can expand capacity, so supply responds more — more elastic.
You've got it
- $\text{PES} = \dfrac{\%\Delta Q_s}{\%\Delta P}$, normally positive
- $\text{PES}>1$ elastic, $\text{PES}<1$ inelastic
- supply is more elastic with more time, spare capacity, and storable stock