PES

Question 1

Contrast the price elasticity of supply for:

  1. A computer software producer
  2. A potato farmer
  3. A firm of solicitors

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.

Question 2

The following shows 3 different car producer’s supply schedules (millions of cars):

Price £000Firm XFirm YFirm Z
1051520
1271620
1491720
16111820
18131920
20152020
22172120
24192220
26212320
28232420

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?