Price Elasticity of Supply - (Supply)

Summary and Exam Tips for Price Elasticity of Supply - (Supply)

Price Elasticity of Supply - (Supply) is a subtopic of Markets in Action, which falls under the subject Economics in the Edexcel International A Levels curriculum.

Price elasticity of supply (PES) measures how responsive the quantity supplied of a good or service is to a change in its price. It is always positive due to the direct relationship between price and supply. The degrees of PES include perfectly elastic ($|PES| = \infty$), elastic ($|PES| > 1$), unitary elastic ($|PES| = 1$), inelastic ($|PES| < 1$), and perfectly inelastic ($|PES| = 0$). Factors influencing PES include the time period, availability of stock, mobility of factors of production, legal constraints, and capacity. The distinction between the short run and long run is significant; in the long run, all factors of production are variable, making PES generally higher compared to the short run where at least one factor is fixed.

Exam Tips

• Understand Key Concepts: Make sure you grasp the different degrees of PES and what they signify about supply responsiveness.
• Calculation Practice: Be comfortable with calculating percentage changes to determine PES values. Remember, PES is always positive.
• Factors Affecting PES: Focus on how time, stock availability, and production capacity influence PES. These are common exam topics.
• Short Run vs Long Run: Know the differences and implications for PES. This can often be a tricky area for students.
• Use Diagrams: Visual aids can help explain concepts like perfectly elastic or inelastic supply, which can be useful in exams.