2.6 Elasticity of supply

Price elasticity of supply (PES) is a measure of the degree of responsiveness of quantity supplied to a change in price. It tells us how much producers change the amount of a good or service they are willing and able to supply when the market price changes.

Because supply curves are generally upward-sloping, an increase in price is normally followed by an increase in quantity supplied. This means price and quantity supplied move in the same direction, so PES is always expressed as a positive value (unlike price elasticity of demand, which is negative because price and quantity demanded move in opposite directions).

$PES=\frac{\%\Delta \text{ quantity supplied}}{\%\Delta \text{ price}}=\frac{\Delta Q_s/Q_s}{\Delta P/P}\times 100$

A high PES value indicates that producers can respond quickly and substantially to a price change; a low PES value indicates that quantity supplied barely changes even if price changes significantly. The specific categories that PES values fall into -- elastic, inelastic, unit elastic, perfectly elastic and perfectly inelastic -- along with the factors that determine which category a good falls into, are covered elsewhere in this subtopic. This block focuses solely on establishing what PES measures and how it is defined and calculated.

Price elasticity of supply (PES) measures how responsive quantity supplied is to a change in price. It tells producers, businesses and policymakers how much sellers will adjust output when the market price rises or falls.

$PES=\frac{\%\Delta \text{Quantity Supplied}}{\%\Delta \text{Price}}$

$PES=\frac{\Delta Q_s/Q_s}{\Delta P/P}\times 100$