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PES

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KJ

Kevin Jeng

Transcript

Initial Price of Coke: 2$

Final price of Coke: 3$

Initial Quantity Supplied of Coke: 160

Final Quantity Supplied Coke: 200

Sample Calculation:

% Change in Price:

% Change in Quantity Supplied:

PEoS = [(final quantity-supplied - initial quantity supplied)*100]/[final price - initial price)*100]

Change in Quantity Supplied = [(200-160)]/(160) = 1/4 = .25

Change in Price: [(3-2)]/(2) = 1/2 = 0.5

PEoS = (0.25)/(0.5) = 1

Interpretation:

if PEoS < 1 ---> Supply is Inelastic to Price (not sensitive to price change)

if PEoS = 1 ---> Supply is Unit Elastic to Price

if PEoS > 1 ---> Supply is Price Elastic (sensitive to price change)

  • The factors of production depend on labour, and materials.

More skill labor-low elasticity

Longer training-low elasticity

Short supply, long delivery period, and special materials- low elasticity

  • Stock

Stock - elasticity of supply increase.

Capacity

More spare capacity = more elasticity of supply

Time Period - Farming

Short run : Usually for after Planting Season. Little or no changes can possibly be made.

Long run: When farmers have more money. New producing method.

  • PES for Primary Commodities- low
  • Take time to respond to price change
  • Price is hard to differ with the quantity supplied.
  • PES for manufactured products are relatively high
  • Manufactured products can respond faster.
  • Price of product A increase- quantity supplied increase directly.
  • No source will delay the change.

Thanks For Listening!

Explain the concept of price elasticity of supply, understanding that it involves responsiveness of quantity supplied to a change in price along a given supply curve.

How much the supplier changes the quantity supply of the product when the price of the product changes.

How to calculate PES?

フランスの法律の下でフランスで行わ結婚はイギリスで認識されています。Formula for calculating percentage: [(a-b)/(b)]*100

(final price - initial price)/(initial price)*100 = % change.

The formula for calculating PES:

[(final quantity supplied - initial quantity supplied)*100]/[final price - initial price)*100] = how responsive is the supplier is to the change of price.

Elastic --> Measurement of how variables affects each other when they change in value.

  • Quantity supplied changes, price does not change -price is elastic to supply.
  • Price changes, quantity supplied does not change -supplier is not that responsive to the price.

Price Elasticity of Supply

PES

The measure of how responsive the supplier is to the change of price.

PES

PES is relatively low especially for agricultural products that depend on farming seasons.

Citation:

http.://www.youtube.com/watch?v=20b_zVHmZG0

http://www.chatt.hdsb.ca/~dalyr/FOV1-000DC265/FOV1-0013E47C/FOV1-0013E47D/page_98.htm

http://economics.about.com/cs/micfrohelp/a/supply_elast.htm

http://en.wikipedia.org/wiki/Price_elasticity_of_supply

http://tutor2u.net/economics/content/topics/elasticity/elasticity_of_supply.htm