Price elasticity of supply
Introduced| English | Meaning |
|---|---|
| price elasticity of supply/praɪs ɪlæˈstɪsɪti ɒv səˈplaɪ/ | The percentage change in quantity supplied divided by the percentage change in price. |
| elastic/ɪˈlæstɪk/ | Describing demand or supply whose percentage response exceeds the percentage change in its determining price or income. |
| inelastic/ɪnɪˈlæstɪk/ | Describing demand or supply whose percentage response is smaller than the percentage change in its determining price or income. |
| spare capacity/speə kəˈpæsɪti/ | The difference between current output and the output that could be produced with available resources. |
| mobility of factors/məʊˈbɪlɪti ɒv ˈfæktəz/ | mobility of factors |
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?
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PES = 30% / 20% = 1.5 — elastic.
PES = (% change in quantity supplied) ÷ (% change in ______).
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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:
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PES > 1 means quantity supplied responds strongly to price.
Why is the supply of a farm crop usually inelastic in the short run?
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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 less elastic over a longer time period.
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False. Given more time, firms can expand capacity, hire workers and enter the market, so supply becomes more elastic in the long run.
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
Write from a PES of 0.4
- Price rises by 25 percent.
- Quantity supplied rises by 10 percent in the same period.
What is the PES?
10 percent over 25 percent is a PES of 0.4.
What is this PES?
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Supply elasticity is positive and here below 1.