Price elasticity of supply measures the responsiveness of supply for a good or service when there is a change in the price.
The key word there is responsiveness, all of your elasticity definitions must include the word responsiveness.
In short, PeS tells us, when there is a change in price, measured by %, will supply change by a bigger or smaller %?
The formula for price elasticity of supply can be seen below.
The key word there is responsiveness, all of your elasticity definitions must include the word responsiveness.
In short, PeS tells us, when there is a change in price, measured by %, will supply change by a bigger or smaller %?
The formula for price elasticity of supply can be seen below.
Elasticity Diagrams
The PeS can be represented within your supply and diagrams through the steepness, or gradient, of the supply curve. The two diagrams below show these differences. Note the difference to the consumer and producer surplus in each diagram.
Elastic PeS
Elastic PeS
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Inelastic PeS
Inelastic PeS
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