MJ Industries

Price elasticity of demand and supply are fundamental economic concepts that measure how quantity demanded or supplied responds to changes in price. This guide will explain these concepts, how to calculate them using the midpoint method, and their implications for businesses and consumers. Additionally, we'll cover the practical steps to succeed in learning these concepts through textbook questions and recommended resources. What is Price Elasticity of Supply? Price elasticity of supply (PES) measures the responsiveness of the quantity supplied of a good to a change in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. Formula : PES = ( Δ Q ( Q 1 + Q 2 ) / 2 ) ( Δ P ( P 1 + P 2 ) / 2 ) \text{PES} = \frac{\left(\frac{\Delta Q}{(Q1 + Q2)/2}\right)}{\left(\frac{\Delta P}{(P1 + P2)/2}\right)} ​ Interpreting PES : Elastic Supply (PES > 1) : Supply is highly responsive to price changes. For example, a 25% increase in pr...

Price elasticity of supply (PES) is a crucial concept in economics that measures how responsive the quantity supplied of a good is to changes in its price. This guide will walk you through the basics of PES, how to calculate it using the midpoint method, and the different types of elasticity. Additionally, we'll provide recommendations for practice activities to reinforce your understanding. The Basics of Price Elasticity of Supply Price Elasticity of Supply is defined as the percentage change in quantity supplied divided by the percentage change in price. It indicates how much the supply of a good will increase or decrease in response to a price change. Calculating PES Using the Midpoint Method The midpoint method is a reliable way to calculate price elasticity of supply. Here’s how to do it: Determine the Change in Quantity Supplied : Subtract the initial quantity supplied from the new quantity supplied. Calculate the Midpoint of Quantities : Add the initial and new quantities s...