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Aryan · 2024-05-10T06:13:19.529Z

Lesson 2.8 • If producers have a high PES (elastic) then they are able to respond to increases in price very quickly • This is desirable as it means producers can increase revenues & profits if they can supply more • Firms can increase their PES by: • Creating more spare capacity on their production lines • Maintaining larger inventories • Using more modern technology • If producers have a low PES (inelastic) then they are less able to respond to increases in price • This shortage in supply will mean that prices continue to rise, possibly causing inflation in the economy • Governments are very interested in the PES of key markets in the economy as they want to ensure that these markets can respond quickly to rising demand • One e.g is the housing market. If the PES of housing is low (inelastic), property prices will become unaffordable with any increase in demand • Another e.g. is the

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Aryan

May 10

Edited: May 10

The Significance of PES for Stakeholders

in Aryan

Lesson 2.8

If producers have a high PES (elastic) then they are able to respond to increases in price very quickly
- This is desirable as it means producers can increase revenues & profits if they can supply more
- Firms can increase their PES by:
  - Creating more spare capacity on their production lines
  - Maintaining larger inventories
  - Using more modern technology
If producers have a low PES (inelastic) then they are less able to respond to increases in price
- This shortage in supply will mean that prices continue to rise, possibly causing inflation in the economy
Governments are very interested in the PES of key markets in the economy as they want to ensure that these markets can respond quickly to rising demand
- One e.g is the housing market. If the PES of housing is low (inelastic), property prices will become unaffordable with any increase in demand
- Another e.g. is the

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