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...