ECON 101 Lecture 7: Lecture 7: Price Elasticity of Supply and Price Ceiling
sangriahare462 and 5 others unlocked
30
ECON 101 Full Course Notes
Verified Note
30 documents
Document Summary
Measuring the price elasticity of supply (pes) Pes is a measure of the responsiveness of the quantity of a good supplied to the price of that good. It is the ratio of the percent change in the quantity supplied to the percent change in the price as we move along the supply curve. Ranges are the same as price elasticity of demand. Pes tends to be large when inputs are readily available and can be shifted into and out of the production at a relatively low cost. It ends to be small when inputs are difficult to obtain. Pes tends to grow larger as producers have more time to respond to a price change. This means that the long-run pes is often higher than the short-run elasticity. There is perfectly inelastic supply when the pes is 0, so that changes in the price of the good have no effect on the quantity supplied.