Price elasticity of supply (PES)

Price elasticity of supply and its determinants

Price elasticity of supply: measures the responsiveness of quantity supplied to a change in price along a given supply curve.


  • The value will always be positive

Price elastic supply (less than infinity).

Figure 2.6 - Price elastic supply

Price inelastic supply (greater than zero).

Figure 2.7 - Price inelastic supply

Unit elastic of supply

  • Mathematically, any straight-line supply curve passing through the origin is unit elastic of supply.
Figure 2.8 - Unit elastic supply

Perfectly elastic supply, only supplied at a certain price level.

Figure 2.9 - Perectly elastic supply

Perfectly inelastic supply, supply is constant at any price level.

Figure 2.10 - Perfectly inelastic supply

Determinants of PES:

  1. Time period considered: longer the time period consideredthe more elastic (time to increase the factors of production, such as capital)
  2. Mobility of factors of production: higher the mobility of factors of productionthe more elastic (easier to change to another production with less costs when price rises)
  3. Unused capacity: if more capacityproductive resources not being fully usedthe more elastic (increase output easily without great costs)
  4. Ability to store stocks: if able to store high level of stocksthe more elastic (able to react to price increases with swift supply increases)

Applications of price elasticity of supply

Commodities: are raw materials in the primary production. (i.e. cotton & coffee)

  • Inelastic PED, PES, & YED.
  • Higher degree of necessity, takes time to grow/harvest to increase Qs, few or no substitutes

Manufactured products & service → relatively high (elastic) PED, PES, YED.