Price elasticity of supply measures the responsiveness of the quantity supplied of a good to a change in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. If the price elasticity of supply is greater than 1, supply is elastic. If it is less than 1, supply is inelastic. If it is equal to 1, supply is unitary elastic. Examples of perfectly elastic and perfectly inelastic supply curves are also provided. Factors like time, production capacity, producers, and stored products can affect the price elasticity of supply. An example problem calculates the price elasticity of supply for an individual supplying bags and finds it to be elastic at 4.

1. SHAHI RAZ AKHTARSHAHI RAZ AKHTAR
PRICE ELASTICITY OF SUPPLY
BS COMMERCE
IST SEMISTER

2. MEASURES THE RESPONSIVENESS OF SUPPLY
TO A CHANGE IN PRICE.
Price Elasticity of Supply
DEF:- THE RATIO BETWEEN % CHANGE IN
QUANTITY SUPPLIED TO THE % CHANGE IN
PRICE.

3. Price Elasticity of Supply
Percentage Change in Quantity Supplied
Percentage Change in PricePES =
Remember:
Es = coefficient of price elasticity
QS = Quantity Supplied
P = Price
PES =
% ∆QS
% ∆P

4. •PEs > 1 supply is elastic
•PEs < 1 supply is inelastic
•PEs = 1 Unitary Elastic
•PEs= ∞ Totally Elastic
•PEs= 0 Totally In-Elastic

5. Figure 1. Elastic Supply Curve
PRICE
P1
P2
0
Q1 Q2
S
QUANTITY

6. Figure 2. Inelastic Supply Curve
PRICE
P1
P2
0
Q1 Q2
S
QUANTITY

7. Figure 3. Unitary Supply Curve
PRICE
P1
P2
0
Q1 Q2
S
QUANTITY

8. Figure 4. Perfectly Elastic Supply Curve
PRICE
P1
0
S
QUANTITY

9. Figure 5. Perfectly Inelastic Supply Curve
PRICE
P1
P2
0
S
QUANTITY

10. 1- TIME
2- PRODUCTION CAPACITY
3- PRODUCER OR CHIEF
4- STORED PRODUCTS
FACTORS That affect PRICE
ELASTICITY OF SUPPLY

11. Problem #1
An individual used to raise 10 bags which sell on the
market at a minimum of $8 each. For some reasons,
the market price per bag reached $10. He decided to
raise 20. Let us find out how elastic or responsive the
production was to price.

12. Given variables?
Qs1 = 10
P1 = $8 each
Qs2 = 20
P2 = $10
∆Qs = ? ; ∆P = ?
PES = ?

13. Q2-Q1 20-10 10
∆QS = = = = 1
Q1 10 10
P2-P1 10-8 2
∆P = = = = 0.25
P1 8 8

14. ∆Qs 1
PES = = = 4
∆ P 0.25
 We conclude that the PEOS is 4 .
 So PEOS is used to see how responsive or
sensitive is supply of a good to change in price.

15. QACCCOMMERCE@YAHOO.COM
PATHANKING12@YAHOO.COM
THE END