Real-World Examples of Price Elasticity of Supply (PES) in Action

📚 Quick Study Guide

• 📈 Price Elasticity of Supply (PES) measures the responsiveness of quantity supplied to a change in price.
• 📐 Formula: $PES = \frac{\% \ Change \ in \ Quantity \ Supplied}{\% \ Change \ in \ Price}$
• Elastic Supply: $PES > 1$ (Quantity supplied is highly responsive to price changes).
• Inelastic Supply: $PES < 1$ (Quantity supplied is not very responsive to price changes).
• Unit Elastic Supply: $PES = 1$ (Percentage change in quantity supplied is equal to the percentage change in price).
• ⏳ Factors affecting PES: Availability of resources, production time, storage capacity.

Practice Quiz

1. Which of the following best describes price elasticity of supply?
   1. A. The responsiveness of quantity demanded to a change in price.
   2. B. The responsiveness of quantity supplied to a change in income.
   3. C. The responsiveness of quantity supplied to a change in price.
   4. D. The responsiveness of quantity demanded to a change in supply.


2. If the price of wheat increases by 10% and the quantity supplied increases by 5%, what is the price elasticity of supply?
   1. A. 0.5
   2. B. 2
   3. C. 50
   4. D. 1.5


3. Which product is most likely to have an inelastic supply in the short term?
   1. A. Smartphones
   2. B. Agricultural products (e.g., fresh tomatoes)
   3. C. Software
   4. D. Clothing


4. An increase in the cost of raw materials for producing steel would likely cause what change in the price elasticity of supply for steel?
   1. A. Increase in elasticity
   2. B. Decrease in elasticity
   3. C. No change in elasticity
   4. D. Supply becomes perfectly elastic


5. A company can quickly increase production of product X in response to a price increase. Product X most likely has:
   1. A. Inelastic supply
   2. B. Elastic supply
   3. C. Unit elastic supply
   4. D. Perfectly inelastic supply


6. Which of the following factors would likely make the supply of a product more elastic?
   1. A. Long production time
   2. B. High storage costs
   3. C. Readily available resources
   4. D. Complex production process


7. Suppose a new technology dramatically speeds up the production of solar panels. What is the likely impact on the price elasticity of supply for solar panels?
   1. A. Supply becomes more inelastic
   2. B. Supply becomes perfectly inelastic
   3. C. Supply becomes more elastic
   4. D. No change in supply elasticity