📚 Topic Summary
Price elasticity of supply (PES) measures how much the quantity supplied of a good or service changes when its price changes. If supply is very responsive to price changes, it's considered elastic. If supply doesn't change much, it's inelastic. The formula is pretty straightforward: Percentage Change in Quantity Supplied divided by Percentage Change in Price. Understanding PES helps businesses make informed decisions about production and pricing.
🧮 Part A: Vocabulary
Match each term with its definition:
- Term: Elastic Supply
- Term: Inelastic Supply
- Term: Price Elasticity of Supply (PES)
- Term: Unit Elastic Supply
- Term: Supply Schedule
- Definition: The responsiveness of quantity supplied to a change in price.
- Definition: Supply is very responsive to price changes.
- Definition: Supply is not very responsive to price changes.
- Definition: PES = 1; Percentage change in quantity supplied equals the percentage change in price.
- Definition: A table that shows the relationship between the price of a good and the quantity supplied.
✍️ Part B: Fill in the Blanks
Complete the following paragraph using the words provided (may not be used at all): elastic, inelastic, greater, less, quantity supplied, price.
If the price of coffee beans increases by 10% and the __________ increases by only 2%, the supply of coffee beans is considered __________. This is because the percentage change in __________ is __________ than the percentage change in __________.
🤔 Part C: Critical Thinking
Imagine you are a farmer who grows strawberries. How would you use your understanding of price elasticity of supply to make decisions about how many strawberries to plant each year?