Price Elasticity of Supply
- Created by: hannahmannion
- Created on: 11-05-16 17:29
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- Price Elasticity of Supply
- % change in QS divided by % change in price
- *Golden Rule* SOT - supply on top
- >1=elastic 1=unit elastic 0--1=inelastic 0=perfectly inelastic /=perfectly elastic
- Elastic - %change supply > %change in price (stock, spare capacity, occupation mobility)
- Inelastic - %change price > %change QS (low stock, long production process etc)
- Unit = supply rises in falls in direct proportion to change in P
- Perfectly inelastic = no impact on supply
- Perfectly elastic = supply shifts following price change to that horizontal level.
- What determines PES?
- Stocks of raw materials & completed products
- Time/length of production process
- Spare capacity available
- Ease with which factors can be switched
- % change in QS divided by % change in price
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