Questions on price elasticity of supply
Contrast the price elasticity of supply for:
- A computer software producer
- A potato farmer
- 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.
The following shows 3 different car producer’s supply schedules (millions of cars):
|Price £000||Firm X||Firm Y||Firm Z|
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?