What PES measures
Responsiveness of quantity supplied to a price change. Usually positive; judged by size.
Price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in the good's own price.
Because price and quantity supplied move in the same direction (law of supply), PES is normally positive.
Interpreting the size:
| Value of PES | Description | Meaning |
|---|---|---|
| PES = 0 | Perfectly inelastic | Quantity supplied fixed — vertical supply curve |
| 0 < PES < 1 | Inelastic | Quantity supplied changes proportionately less than price |
| PES = 1 | Unitary elastic | Quantity supplied changes by the same proportion as price |
| PES > 1 | Elastic | Quantity supplied changes proportionately more than price |
| PES = ∞ | Perfectly elastic | Firms supply any amount at the going price — horizontal supply curve |
Worked example. Price rises from $8 to $10 (+25%) and quantity supplied rises from 200 to 230 (+15%). PES = +15% ÷ +25% = +0.6, so supply is inelastic.
- PES = %ΔQs ÷ %ΔP (normally positive).
- PES > 1 elastic; < 1 inelastic; = 1 unitary; = 0 perfectly inelastic; = ∞ perfectly elastic.
- Same %-change method as PED — convert to percentages first.
- A vertical supply curve = perfectly inelastic; horizontal = perfectly elastic.
See the full worked example for price elasticity of supply →