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565201
Price Elasticity of Supply
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Mind Map on Price Elasticity of Supply, created by harrysimmons4 on 20/02/2014.
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harrysimmons4
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harrysimmons4
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Resource summary
Price Elasticity of Supply
Price elasticity of supply measures the responsiveness of quantity supplied to a change in price
Annotations:
It is necessary for a firm to know how quickly, and effectively, it can respond to changing market conditions, especially to price changes.
It is necessary for a firm to know how quickly, and effectively, it can respond to changing market conditions, especially to price changes.
Equation
% change in quantity supplied/ % change in price
Perfect elasticity, where supply is infinite at any one price.
Graph is horizontal
Perfect inelasticity, where only one quantity can be supplied
Graph is vertical
Unit elasticity, linear supply curve
Determinants
1. Are resource inputs readily available
2. Are factors mobile
3.Can products be easily stored
4. Is production running at full capacity.
5. How long and complex is the production cycle
A high PES is desirable for a firm, as it makes them more responsive to a change in price, therefore more competitive.
Improving PES
Create spare capacity
Latest tech
sufficient stocks
Better storage
Flexible Labour
<1 = Inelastic. >1 = Elatic
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