Price Elasticity Of Supply Calculator

Price Elasticity of Supply Formula:

\[ PES = \frac{\%\Delta Q_s}{\%\Delta P} \]

Initial Quantity Supplied (Q₁):

units

New Quantity Supplied (Q₂):

units

Initial Price (P₁):

New Price (P₂):

Price Elasticity of Supply (PES):

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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:

\[ PES = \frac{\%\Delta Q_s}{\%\Delta P} \]

Where:

\( PES \) — Price Elasticity of Supply
\( \%\Delta Q_s \) — Percentage change in quantity supplied
\( \%\Delta P \) — Percentage change in price

Calculation Steps:

Calculate percentage change in quantity: \( \frac{Q_2 - Q_1}{Q_1} \times 100\% \)
Calculate percentage change in price: \( \frac{P_2 - P_1}{P_1} \times 100\% \)
Divide percentage quantity change by percentage price change

3. Importance of PES Calculation

Details: Understanding supply elasticity helps businesses make production decisions, governments design tax policies, and economists analyze market behavior. It indicates how quickly producers can adjust output in response to price changes.

4. Using the Calculator

Tips: Enter initial and new quantities supplied, and initial and new prices. All values must be positive numbers. The calculator will compute the percentage changes and the final PES value.

5. Frequently Asked Questions (FAQ)

Q1: What do different PES values mean?
A: PES > 1 = elastic supply; PES < 1 = inelastic supply; PES = 1 = unitary elastic; PES = 0 = perfectly inelastic; PES = ∞ = perfectly elastic.

Q2: What factors affect supply elasticity?
A: Production time, availability of inputs, technology, spare capacity, and ability to store products all influence how responsive supply is to price changes.

Q3: Why is PES usually positive?
A: PES is typically positive because higher prices create incentives for producers to supply more, following the law of supply.

Q4: How does time affect supply elasticity?
A: Supply becomes more elastic over time as producers have more opportunity to adjust production levels, acquire resources, and change technology.

Q5: What is the difference between PES and PED?
A: PES measures supplier responsiveness to price changes, while PED (Price Elasticity of Demand) measures consumer responsiveness to price changes.