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PES shows quickly a firm can respond to a change in market conditions. More specifically it shows how quickly firms respond to a change in price.
The following shows 3 different car producer’s supply schedules
(millions of cars)
Price £000 | Firm X | Firm Y | Firm Z |
10 | 5 | 15 | 20 |
12 | 7 | 16 | 20 |
14 | 9 | 17 | 20 |
16 | 11 | 18 | 20 |
18 | 13 | 19 | 20 |
20 | 15 | 20 | 20 |
22 | 17 | 21 | 20 |
24 | 19 | 22 | 20 |
26 | 21 | 23 | 20 |
28 | 23 | 24 | 20 |
1. Using the correct equation, work out the PES value for all three firms for the price range £24,000 to £26,000.
2. Draw all three supply curves, labelling them correctly.
3. Which firm is the most competitive, and why?
4. What could the ‘least competitive’ firm do to improve its competitiveness?
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