MJ Industries

Price elasticity of supply (PES) is a fundamental concept in economics that explains how the quantity of a good supplied changes in response to price fluctuations. This concept is vital for both businesses and economists to make informed decisions about production and pricing strategies. What is Price Elasticity of Supply? Price elasticity of supply measures the responsiveness of the quantity supplied of a good to a change in its price. When prices rise, suppliers generally increase the amount of goods they produce, and when prices fall, they reduce production. The degree to which they adjust their supply is what PES quantifies. Mathematically, PES is calculated as: P E S = %  change in quantity supplied %  change in price PES = \frac{\% \text{ change in quantity supplied}}{\% \text{ change in price}} ​ This equation tells us how sensitive the supply of a product is to changes in price. How to Calculate PES Using the Midpoint Method To accurately deter...

Market equilibrium is the point where the supply of a good or service meets the demand, establishing a price that both buyers and sellers agree on. It is the cornerstone of a well-functioning market, where negotiations between buyers and sellers shape the prices of goods and services. What is Market Equilibrium? Market equilibrium occurs when the quantity demanded by buyers equals the quantity supplied by sellers. At this point, the market price remains stable, allowing transactions to flow smoothly. For example, let’s consider a market for oranges. Buyers and sellers may negotiate to arrive at a price of $4 per kilogram, at which the quantity of oranges demanded by buyers equals the quantity supplied by sellers. The Role of Supply and Demand in Price Setting The interaction between supply and demand is fundamental in setting prices in any market. The quantity demanded refers to the amount buyers are willing to purchase at a given price, while the quantity supplied refers to how much...