2.3.1 Definition of PES
Definition: Price elasticity of supply (PES) measures the responsiveness of quantity supplied of a good to a change in its price.
Example: When onion prices rise sharply, farmers cannot increase supply until the next harvest, so supply is inelastic in the short run.
Analysis chain (AO2): PES measures how far firms can increase output when price rises → depends on spare capacity, stocks, time and factor mobility.
Evaluation (AO3):
- PES is usually higher in the long run than the short run, so a single PES value can be misleading.
🔒 Also in the full notes
- 2.3.2 Formula and calculation
- 2.3.3 Significance of relative percentage changes, size and sign of the coefficient
- 2.3.4 Factors affecting PES
- 2.3.5 Implications for the speed and ease with which firms react to changed market conditions
- Exam practice: 5 practice questions
- 2 exemplar answers with full model answers and mark breakdowns
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