Price Elasticity of Supply Calculator
Calculate how responsive quantity supplied is to price changes
Price Elasticity of Supply Analysis
Direct Percentage Input
Enter the percentage changes directly
Positive values indicate price increases
Positive values indicate quantity increases
Price Elasticity of Supply Results
Economic Interpretation: Quantity supplied is highly responsive to price changes
Business Implication: Easy to adjust production levels (e.g., manufactured goods)
Formula Used
Time Factor Considerations
Example: Agricultural Product Supply
Scenario
Product: Wheat (short-term analysis)
Initial Price: $5.00 per bushel
New Price: $5.50 per bushel (10% increase)
Initial Quantity Supplied: 1,000 bushels
New Quantity Supplied: 1,050 bushels (5% increase)
Calculation
Price change: (5.50 - 5.00) / 5.00 x 100 = 10%
Quantity change: (1,050 - 1,000) / 1,000 x 100 = 5%
PES = 5% / 10% = 0.5
Result: Inelastic supply - Farmers cannot quickly increase wheat production due to fixed land and seasonal constraints.
Supply Elasticity Types
Perfectly Inelastic (PES = 0)
Fixed supply (land, antiques)
Inelastic (PES < 1)
Limited production flexibility
Unit Elastic (PES = 1)
Proportional response
Elastic (PES > 1)
Highly responsive supply
Perfectly Elastic (PES = Infinity)
Infinite responsiveness
Key Determinants
Availability of inputs and raw materials
Time period for adjustment
Production capacity and flexibility
Ease of market entry/exit
Storage and inventory costs
Understanding Price Elasticity of Supply
What is Price Elasticity of Supply?
Price elasticity of supply (PES) measures how responsive the quantity supplied of a good is to changes in its price. It helps businesses and economists understand how quickly suppliers can adjust production levels when market prices change.
Why is it Important?
- -Production planning and capacity decisions
- -Pricing strategy development
- -Market analysis and forecasting
- -Government policy impact assessment
Calculation Methods
Standard Method
% Change = (New - Old) / Old x 100
Uses initial values as base
Midpoint Method
% Change = (New - Old) / Average x 100
Uses average of initial and final values