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 Price Elasticity of Supply formula:

Where:

• \( PES \) — Price Elasticity of Supply
• \( \%\Delta Q_s \) — 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 sensitive producers are to price changes.

3. Importance of PES Calculation

Details: Understanding supply elasticity helps businesses make production decisions, governments design tax policies, and economists analyze market behavior and predict supply responses to price changes.

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 price change cannot be zero.

5. Frequently Asked Questions (FAQ)

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

Q2: What factors affect supply elasticity?
A: Time period, production capacity, availability of inputs, technology, and storage capabilities significantly influence supply elasticity.

Q3: Why is supply usually more elastic in the long run?
A: Producers have more time to adjust production levels, invest in new capacity, and develop alternative production methods in the long run.

Q4: How is PES different from PED?
A: PES measures producer responsiveness to price changes, while Price Elasticity of Demand (PED) measures consumer responsiveness to price changes.

Q5: Can PES be negative?
A: Typically no, as supply curves are upward sloping. Higher prices generally lead to increased quantity supplied, resulting in positive PES values.