PES – definition
Price elasticity of supply (PES) is the responsiveness of quantity supplied to a change in price. PES is calculated using the following formula:
|% Change in quantity|
|% Change in price|
Hence, if the price of a smartphone increases from £400 to £440 (a 10% increase), and supply increases from 2m a year to 2.1m (a 5% rise), PES for smartphones would be:
Which gives a PES value of (+) 0.5. The positive sign shows that price and quantity supplied are positively related, and the value (0.5) is less than 1, which means the PES for smartphones is inelastic.
Explaining The K-Shaped Economic Recovery from Covid-19 A K-shaped recovery exists post-recession where various segments of the economy recover at their own rates or levels, as opposed to a uniform recovery where each industry takes the same ...
Does Public Choice Theory Affect Economic Output? Both on paper and in real life, there is a solid relationship between economics, public choice, and politics. The economy is one of the major political arenas after all. ...
Largest Retail Bankruptcies Caused By 2020 Pandemic As we know at this point, the COVID-19 pandemic has thrown major companies in the US and the world over into complete havoc. Many have filed for bankruptcy, with an ...
Identifying Speculative Bubbles and Its Effect on Markets Speculation plays an interesting role in economics and one that drastically affects markets. If you ever see "speculation" in this context, be sure to pay attention. It is ...
Explaining The Disconnect Between The Economy and The Stock Market Starting with the end of the 2009 recession, the U.S. economy grew 120 straight months, the longest stretch in history. During that time, the S&P ...
Consumer Confidence Compared to Q2 Job Growth Since WWII, nothing has caught global attention and heightened economic fears quite like Covid-19. Many economies are at the brink of collapse, as companies struggle to stay afloat. World governments ...