PES

Summary and Exam Tips for PES

Price Elasticity of Supply (PES) is a subtopic of Microeconomics, which falls under the subject of Economics in the IB DP curriculum. PES measures the responsiveness of the quantity supplied of a good or service 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 inelastic ($|PES| = 0$), inelastic ($|PES| < 1$), unitary elastic ($|PES| = 1$), elastic ($|PES| > 1$), and perfectly elastic ($|PES| = \infty$). Key determinants of PES are production time, mobility of factors of production, unused capacity, ability to store, and the rate at which costs increase. Generally, PES for primary commodities is lower than for manufactured products due to longer production times, perishability, and limited mobility of production factors.

Exam Tips

• Understand Key Concepts: Make sure you can define PES and explain its significance in microeconomics. Use examples like rice and TVs to illustrate different degrees of PES.
• Memorize the Formula: Remember the PES formula: $\text{PES} = \frac{\%\text{ change in quantity supplied}}{\%\text{ change in price}}$.
• Identify Determinants: Be able to discuss how factors like production time and storage ability affect PES. This is crucial for higher-level questions.
• Compare Commodities: Understand why PES for primary commodities is generally lower than for manufactured goods. Focus on production time and storage issues.
• Practice Calculations: Work through examples to calculate PES and interpret the results, ensuring you can distinguish between elastic and inelastic supply.