1. What is Price Elasticity of Supply?

Price Elasticity of Supply (PES) measures the responsiveness of quantity supplied to changes in price. It indicates how much the quantity supplied changes when the price changes by 1%.

2. How Does the Calculator Work?

The calculator uses the PES formula:

Where:

• \( PES \) — Price Elasticity of Supply
• \( \%\Delta Q \) — Percentage change in quantity supplied
• \( \%\Delta P \) — Percentage change in price

Explanation: The formula calculates the ratio of percentage change in quantity supplied to percentage change in price, showing how responsive producers are to price changes.

3. Importance of PES Calculation

Details: Understanding PES helps businesses and policymakers predict how supply will respond to price changes, plan production strategies, and analyze market dynamics.

4. Using the Calculator

Tips: Enter percentage change in quantity supplied and percentage change in price as decimal numbers (e.g., 10% as 10). The denominator (%ΔP) cannot be zero.

5. Frequently Asked Questions (FAQ)

Q1: What do different PES values mean?
A: PES > 1 = elastic supply, PES < 1 = inelastic supply, PES = 1 = unitary elastic, PES = 0 = perfectly inelastic, PES = ∞ = perfectly elastic.

Q2: What factors affect PES?
A: Time period, production capacity, availability of inputs, mobility of factors, and technology affect how quickly producers can respond to price changes.

Q3: Why is PES usually positive?
A: Higher prices typically incentivize producers to supply more, creating a positive relationship between price and quantity supplied.

Q4: How does time affect PES?
A: Supply becomes more elastic over time as producers have more opportunity to adjust production levels and capacity.

Q5: What are practical applications of PES?
A: Used in business planning, government policy making, market analysis, and predicting how tax changes will affect supply.