Price elasticity of Supply

Definition:

PES:  A measure used to show the responsiveness, or elasticity, of the quantity supplied of a good

or service to a change in its price. The PES is always a positive number

Formula

PED = % change in Quantity Supplied             PED = (New QS – Old QS) x100

                      % change in Price                          ,              (New P – Old P) x 100

Inelastic  : The PED value is between 0 and 1. It tends to have few substitutes and takes time to alter the

quantity of production.

Elastic     : The PED value is between 1 and ∞.

Note: The amount supplied is not always equal to supply and may create shortages and surplus.