Price elasticity of supply measures the relationship between change in quantity supplied and a change in price
P.e.s = percentage change in quantity supplied / percentage change in price
Answer is always positive
If supply is elastic, producers can increase their output without a rise in cost or a time delay
If supply is inelastic, producers find it hard to change their production in a given time
Factors effecting Price Elasticity of Supply:
- Spare production capacity
- Stocks of finished products and components
- Time period and production speed
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