#economics #pes

• If the product of pes was 0, the the supply would be considered as perfectly priced inelastic, basically a change in price would not the change the supply, even if the price of the product increases the supply or the demand wont change

• Theoretically if the value of pes is equal to infinity, then it would be considered as perfectly priced elasticity, as quantity of supply can change any change of price

• If the pes value is equivalent to 1, then supply has unitary price elasticity, this means the percentage change in supply matches to the percentage change in price

Determinants To Price Elasticity Of Supply

• The Degree Of Spare Capacity - If a firm has plenty of spare capacity then it can increase supply with relative ease, without increasing its costs of production. This means that supply is relatively price elastic.

• The Level Of Stocks - If firms have unused materials and products, they can respond to a price change quickly as they can bring these products to the market

• The number of producers in the industry - the more suppliers of a product there are in the industry, the easier it tends to be for firms to increase their output in response to a price increase. For example, there is plenty of competition in the restaurant trade, so suppliers will be highly responsive to increases in price.