top of page
Price Elasticity of Supply (PES)
-
Measure of the responsiveness of the quantity of a good supplied to changes in its price
-
PES = percentage change in Qsx / percentage change in price x
PES indicators
PES Determinants (TMSS)
PES & Primary Commodities
-
Primary commodities usually have lower PES since it needs greater time to respond to price changing
-
Manufactured product usually has higher PES since it could be reproduced fastly (respond faster to price changes)
-
Other primary products such as oil, natural gas, and minerals, due to the enormous cost of further production, firms will usually wait for investments and shortages before they produce more. So lower PES could be expected.
*When PES is low, a greater price fluctuation appears when a change in demand occurs
bottom of page