Perfect Elasticity

• The %∆ in QS will fall to zero with any %∆ in P. However, supply is unlimited at a particular price. This is a very theoretical scenario 

• Value - ∞

Unitary Elasticity

• Any supply curve that starts at the origin (e.g. S1, S2 or S3) has a PES value equal to 1. The %∆ in P = %∆ in QS

• Value - 1

Determinants Of PES

• Some products are more responsive to changes in prices than other products

• The factors that determine the responsiveness are called the determinants of PES & include :

  • Mobility of the factors of production: if producers can quickly switch their resources between products, then the PES will be more elastic. For example, if prices of hiking boots increase & shoe manufacturers can switch resources from producing trainers to boots, then boots will be price elastic in supply

  • Availability of raw materials: if raw materials are scarce then PES will be low (inelastic). If they are abundant, PES will be higher (elastic)

  • Ability to store goods: if products can be easily stored then PES will be higher (elastic) as producers can quickly increase supply (for example, tinned food products). An inability to store products results in lower PES (inelastic)

  • Time period: In the short run, producers may find it harder to respond to an increase in prices as it takes time to produce the product (e.g., avocados). However, in the long run they can change any of their factors of production so as to produce more